1. Moody’s fires fresh salvo at Modi, says India government debt significantly high

Moody’s fires fresh salvo at Modi, says India government debt significantly high

India’s general government debt level is "significantly" higher compared with similarly rated countries, Moody’s Investor Service said.

By: | Updated: June 1, 2017 11:31 AM
India, Moody's Investor Service, Narendra Modi, Modi, BJP government, Government debt, sovereign upgrade India’s general government debt level is “significantly” higher compared with similarly rated countries, Moody’s Investor Service said.(Image: Reuters)

India’s general government debt level is “significantly” higher compared with similarly rated countries, Moody’s Investor Service said, firing a fresh salvo at Prime Minister Narendra Modi’s government which has been trying hard to earn a sovereign upgrade. Rating agencies have India just above “junk” status and while Modi’s government has consistently pushed for a sovereign upgrade in the past few years, Moody’s, Standard & Poor’s and Fitch Ratings have all pushed back, citing high debt levels. On Thursday, Moody’s said that while the general government debt level declined to 67.5 percent of gross domestic product in 2016 from 84.7 percent in 2003, it remains a “key credit constraint.” Moody’s notes that India’s debt burden is higher than most of its Baa peers including the Bahamas and South Africa. Baa is medium-grade credit risk which may have speculative characteristics, according to Moody’s. Moody’s India rating is at Baa3, the lowest on that rung.

“We view ongoing central government deficit reduction as supportive of India’s credit profile,” Moody’s said in a note. “However, the recent widening of Indian state deficits has more than offset the narrowing of the central government deficit.” Finance Minister Arun Jaitley in his February budget speech reiterated New Delhi’s commitment to fiscal consolidation, pegging the central government fiscal deficit targets at 3.2 percent of GDP for fiscal 2017-18 and 3 percent for 2018-19, down from 3.5 percent in 2016-17. Moody’s said a new medium-term fiscal framework would help guide the fiscal consolidation process, if adhered to. The new framework, which has been recently proposed, aims to bring down the federal government fiscal-deficit target to 2.5 percent by 2023 while reducing the debt-to-GDP ratio to 60 percent by 2023.

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Moody’s was upbeat about India’s move to adopt a unified tax code for goods and services, scheduled to be implemented on July 1. “Over the medium term, goods and services tax will contribute to productivity gains and higher GDP growth by improving ease of doing business, unifying markets and will enhance India’s attractiveness as a foreign investment destination. GST will also support higher government revenue generation through improved tax compliance and administration,” it said. Nevertheless, the high levels of bad loans in the banking system were a key risk to growth, Moody’s said, adding India would need to resolve it to kickstart the investment cycle.

  1. D
    DAXESH
    Jun 1, 2017 at 1:24 pm
    our future income decide how much debt we have to kept & future income depend upon infrastructure, human man power, technology upgradation etc
    Reply
    1. S
      Sadasivan
      Jun 1, 2017 at 12:15 pm
      SMEs will be crushed,as they will not be able to compete with the Big Corporations.
      Reply
      1. S
        Sadasivan
        Jun 1, 2017 at 12:13 pm
        When the Blackmoney OUTSIDE India,remains there itself,any IMPROVED tax compliance,is of not much significance.Similarly Capitation Fee seems to be prevalent even now.Trusts.Foundations and Educational intuitions have to be SUITABLY taxed,if GST is to have any relevance.Taxation for its own sake and removal subsidies,even in the absence of SSS,like iin the developed economies,is IMF;s per demand. Austerity for Indians is what the Elites,want.Please google for:- IMF Riot
        Reply
        1. S
          Sadasivan
          Jun 1, 2017 at 12:18 pm
          SMEs do not get Bank Loans to boot,while the Big Defaulters,continue to get Loans to service the interest etc Double Whammy for the SMEs.More than GST,Banks' lending policies need a sea change,like ONLY SECURED Loans,on posting suitable Collateral etc.
          Reply

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