Moody’s Investors Service on Monday stated that the strength of the next government’s mandate in the parliamentary election this year will significantly shape India’s medium-term trajectory for fiscal consolidation and governance.
“In India, the strength of the next government’s mandate following parliamentary elections in 2024 will influence the medium-term trajectory for fiscal consolidation and governance more generally,” Moody’s emphasised. The parliamentary election in India is due in April-May.
The central government aims to achieve a medium-term fiscal consolidation target by reducing the fiscal deficit to 4.5% by FY26 from 5.9% in FY24. Fitch, another rating agency, recently said the Narendra Modi government is “most likely” to retain power in India and hoped that policy continuity would be maintained.
Moody’s said moderation in economic conditions in the US and the persistence of subdued growth in the euro area in 2024 will further dampen demand for goods produced in Asia Pacific and curb global commodity prices, but large emerging markets like India will be able to mitigate the impact.
“Stable domestic consumption, underpinned by robust labour markets and the provision of limited targeted fiscal support, will mitigate such factors to varying degrees, particularly in large emerging markets such as India, Indonesia, the Philippines and Vietnam,” Moody’s said.
The cultivation of new sources of growth will also help some economies to navigate the difficult global environment, for example, the adaptation of large services sectors toward the development of disruptive technologies, it added.