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Weak growth could complicate fiscal consolidation

The 2019-20 Union Budget has projected a more gradual decline in government’s debt & assured of its ability to contain fiscal deficit at 3.3% of GDP, lower than the interim Budget’s 3.4 % estimate. In this regard, Moody’s Investors Service has opined that weak growth prospects for India will complicate the government’s fiscal consolidation efforts, impacting its credit quality. Subdued growth will also make fiscal consolidation and raising incomes challenging for the Government. Further, it said that the budget announcements are credit positive for public sector banks, non-banking finance companies (NBFCs), infrastructure sector, property developers, some domestic producers and securitisation transactions. The hike in customs duties on certain imported products is likely to augment the competitiveness of domestic producers.

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