Moody's says Arun Jaitley's Union Budget lacks details on fiscal deficit target

Reuters Posted online: Thursday, Jul 10, 2014 at 0000 hrs
Mumbai : Moody's Investors Service welcomed Finance Minister Arun Jaitley's pledge to keep government finances in check but said the lack of details on how to narrow the fiscal deficit made it challenging to assess the credit impact.

In his government's maiden Budget speech on Thursday, Jaitley said on Thursday the government would stick to a fiscal deficit target of 4.1 percent of gross domestic product (GDP) set by the previous government for the year ending March 2015.

"From a ratings perspective, it is mildly positive to see there's a roadmap, but the lack of details gives us pause," Moody's sovereign rating analyst Atsi Sheth said in a phone interview.

"The intent appears to be there, but the measures have not been really thought through yet," Sheth added.

Moody's currently rates India at "Baa3", the lowest investment-grade rating, with a "stable" outlook.

Sheth added the fiscal deficit target could also be hard to achieve.

"If growth does not revive in the second half of the year, then I do think either they will have to be a very concerted effort at expenditure reduction or it will be missed by a couple of decimal points," Sheth said.