India's fiscal position to remain weak: Moody's


Published On: Thursday, February 25, 2021 | By:

India's fiscal position to remain weak: Moody's

According to the Global rating agency, Moody's India's weak fiscal position will remain a key credit challenge in 2021. Also, the prospects for fiscal consolidation remain weak. Meanwhile, Icra, Moody's Indian affiliate, said it expects a considerable rebound in India's economic growth in the fiscal year ending March 31, 2022 (FY22) on the back of higher central government spending, and a pick-up, albeit uneven, in consumption. Overall, Icra projects that real GDP will rise 10.5 percent in FY22 and nominal GDP by 14.5 percent for fiscal 2022 as the pandemic recedes. Moody's said the central government's fiscal deficit for FY21 and FY22 should be lower than projected. This is on the back of stronger revenue generation in the fourth quarter of fiscal 2021 and higher nominal GDP growth in fiscal 2022.

Moody's said given India's very high debt burden, the gradual pace of consolidation will prevent material strengthening in the government's fiscal position over the medium term. The scenario could be different if nominal GDP growth picks up sustainably to reach much higher rates than historically recorded.

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