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HomeEconomyHigh debt burden constrains India's sovereign ratings: Fitch

High debt burden constrains India’s sovereign ratings: Fitch

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New Delhi: Fitch Ratings today said high debt burden of the government constrains India’s upgrade, a day after Finance Minister Arun Jaitley projecting a of 3.5% of GDP against the earlier target of 3.2%.

The 2018-19 Union Budget unveiled yesterday contains a number of policy measures with the potential to support economic demand and social well being.

These include those leading to rising in agricultural income and the ambitious health plan while setting up new medical colleges.

“If implemented well, spending on such measures would likely reach a large part of the electorate, which is not insignificant with general elections coming up,” Fitch Ratings Director and Primary Sovereign analyst for India Thomas Rookmaaker said.

He said weak public finances “constrain India’s sovereign ratings, given a high general government debt burden of around 68% of GDP and a wide fiscal balance of 6.5% of GDP if states are included.

The Budget has pegged at 3.5% of GDP in the current year ending March, higher than 3.2% targeted earlier.

For the next fiscal, the deficit is projected to be 3.3% of GDP.

“The government has kicked out its steady 3% target further to 2020-21, well beyond its term.

This compares to its initial medium-term fiscal plan of 2014 when it first announced to postpone the 3% target by one year from 2016-17 to 2017-18,” Rookmaaker said.

The government’s commitment to embrace the recommendation of the FRBM committee to adopt a ceiling of 40% of GDP for central government debt is positive, even though the temporary delay in consolidation makes it unlikely that this debt level will be reached by 2022-23, as recommended by the committee last year, Rookmaaker said.

Citing weak fiscal position, US-based agency Fitch in May last year had kept India’s sovereign unchanged at ‘BBB-‘, the lowest investment grade with a stable outlook.

PTI

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