Finance Minister P. Chidambaram’s promise to return to the path of fiscal consolidation has worked. With his commitment reflecting in the fiscal deficit numbers pegged for the current fiscal and the next, global rating agency Moody’s on Monday lauded the effort saying the Budget for 2013-14 is in line with realistic fiscal consolidation and credit positive.
In its credit rating outlook for the country after presentation of the Budget on February 28, Moody’s said: “India’s budget pursues realistic fiscal consolidation, a credit positive for the sovereign…This plan of modest fiscal consolidation is credit positive for the sovereign because, against a backdrop of subdued GDP growth and upcoming elections, it is a realistic effort to correct India's macroeconomic imbalances”.
On GDP growth, however, Moody’s felt that the assumptions could be optimistic. “The Indian government will need a similar commitment and implementation capacity to meet its fiscal 2014 deficit target of 4.8 per cent of GDP, but we consider many of its assumptions optimistic,” it said. Moody’s conceded that a more aggressive fiscal consolidation programme would have been unrealistic. “Although a lower deficit target for fiscal 2014 would have suggested a more aggressive fiscal consolidation effort, it also would have been less realistic,” it said.
