Budget To Support Demand Growth
- Finance minister Nirmala Sitharaman pegged the fiscal deficit for 2023-24 at 5.9% compared to 6.4% in 2022-23
NEW DELHI : Rating agencies Moody’s and Fitch on Friday said the union budget for 2023-24 will support demand growth but Moody’s added the government is unlikely to achieve a fiscal deficit target of 4.5% of GDP by FY26.
“Leveraging buoyant revenue, the government plans to substantially increase spending on infrastructure, while cutting personal income taxes, and providing capital support for the oil sector. The budget plans are credit positive for renewable energy companies, cement and steel producers, oil marketing companies and automakers in particular," Moody’s Investors Service said in a report.
Finance minister Nirmala Sitharaman pegged the fiscal deficit for 2023-24 at 5.9% compared to 6.4% in 2022-23, and reiterated the government’s resolve to narrow it further to 4.5% by 2025-26.
“While continued gradual fiscal consolidation contributes to the stabilization of the government’s debt burden and supports credit quality, the authorities remain unlikely to achieve their ambitious target to narrow the budget deficit to 4.5% of GDP by fiscal 2025," the report said.
It added that notwithstanding improvements in India’s fiscal position in recent years, a high debt burden and weak debt affordability remain key constraints that offset the country’s fundamental strengths, including high growth potential and deep domestic capital markets.
Fitch said the higher spending, tax cuts and supportive policies announced in the budget will support sustained demand growth and improve the longer-term prospects for a number of corporate sectors.
“We believe the tax cuts will boost consumer sentiment and maintain consumption growth, amid expectations of slower economic growth after the financial year ending 31 March 2023 (FY23)," the report said.
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