Giving a thumbs down to the Food Security Bill, rating agency Moody’s, on Thursday, said the measure was credit negative as it would weaken government finances and deteriorate the macroeconomic situation.
“The measure (Food Bill) is credit negative for the Indian government because it will raise government spending on food subsidies to about 1.2 per cent of GDP per year from an estimated 0.8 per cent currently, exacerbating the government’s weak finances,” Moody’s said in a statement.
Moody’s at present assigns ‘Baa3’ rating on India, with a stable outlook. ‘Baa3’ means medium grade with moderate credit risk.
The annual financial burden after its implementation is estimated to be about Rs.1.30 lakh crore at current cost.
As the Bill is likely to be implemented in the remaining months of the current fiscal, its impact on government finances would be less in 2013-14, but much more in the years to come, Moody’s said. “It will raise future subsidy expenditure commitments, hindering the government’s ability to consolidate its finances,” Moody’s said, adding, the government subsidies would contribute to the already high food inflation.
