Will Modi government achieve fiscal deficit target for FY19? Read what Moody’s says

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Published: July 4, 2018 4:09:44 PM

Even though there are risks to achieving 3.3 percent fiscal deficit target for the year ending March 2019, the government may still meet its target, a rating agency said.

PNB, SBI, moody's counterparty risk ratings, Moody's Investors Service, CRR, PNB scam, Moody's CRR list 2018Even though there are risks to achieving 3.3 percent fiscal deficit target for the year ending March 2019, the government may still meet its target. (Reuters)

Even though there are risks in achieving 3.3 percent fiscal deficit target for the year ending March 2019, the government may still meet its target, a rating agency said.  “While we see risks to achieving both budgeted revenue and spending targets, in our view the government would likely cut back on planned capital spending, as in past years, to offset any potential slippage,” Moody’s Investor Service said. In a poll conducted by Moody’s and ICRA in Singapore and Mumbai, rising crude oil prices was identified a as a major risk to economy. The survey also said that there are risks to achieving 3.3 percent fiscal deficit.

In both locations, most attendees said they believed that India would not meet the central government’s fiscal deficit target of 3.3 percent of GDP for the fiscal year ending March 2019. Only 23.3 percent of the respondents in Singapore and 13.6 percent in Mumbai thought that the fiscal targets would be achieved, with 84.7 percent in Mumbai and 76.7 percent in Singapore expecting some fiscal slippage, the report said.

The poll also said that the government’s PSB recapitalisation package is not sufficient, given the banks have not been able to raise capital as planned. In its report Moody’s said: “Similarly to the views of the poll respondents, we also consider higher oil prices to be a risk to growth, but risks to sovereign credit dynamics from oil has diminished in recent years following subsidy reforms to petroleum and diesel fuel; only liquefied petroleum gas and kerosene oil remain subsidised”.

Moody’s said it does not expect oil prices to remain elevated for an extended period. However, this possibility “remains a downside risk”, it said. The price of Indian basket of crude oil soared from $66 a barrel in April to around $75 a barrel currently.

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