Global rating agency Moody’s, on Tuesday, said India’s interim budget was in line with the policy assumptions that underpinned the government’s Baa3 rating with a stable outlook.

The global rating agency has, however, cautioned that India’s fiscal position remains ‘weak’.

“Moody’s stable outlook on India’s Baa3 sovereign rating incorporates the macro-economic risks posed by the government’s high deficit and debt ratios as well as its recent efforts to control the fiscal deficit through ad hoc measures,” it said in a statement.

The rating also incorporates the medium-term credit support provided by the government’s favourable access to domestic savings for the purposes of financing its large borrowing requirements, the statement added.

The new government, which would take office likely by May, would determine the longer-term fiscal trends that could impact the government’s credit profile, it said.

Global rating agencies like Moody’s, S&P and Fitch have repeatedly threatened to lower India’s credit rating and a downgrade would mean pushing the country’s sovereign rating to junk status, making overseas borrowings by corporates costlier.

“Moody’s notes that India’s fiscal deficit ratios have declined over the last two years, but its general (Central and Dtate) government fiscal deficits remain higher than those of similarly rated peers,” it said. Moody’s further said the government’s higher-than-budgeted subsidy bill reveals the fiscal position’s exposure to commodity prices and exchange-rate fluctuations. In the Interim Budget, the government has said that the fiscal deficit for the current financial year would be contained at 4.6 per cent of GDP.

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