February 28, 2015 / 11:53 AM / 4 years ago

Indian budget "credit neutral" from a ratings perspective-Moody's

MUMBAI, Feb 28 (Reuters) - Moody’s Investors Service said India’s 2015/16 budget unveiled on Saturday was “credit neutral,” adding the agency would monitor whether the government can fulfill its pledge to meet its fiscal deficit by boosting economic growth.

The government on Saturday pushed back the deadline to cut the fiscal deficit to 3 percent of gross domestic product to 2017/18, a year later than previously expected, seeking more elbow room to focus on economic growth.

“There is still a constraint on the credit profile from the fiscal side. The government is going to privilege growth and not fiscal consolidation. That is the government’s prerogative,” said Atsi Sheth, Moody’s sovereign ratings analyst, told Reuters.

“I would say that on a balance this (budget) was credit neutral.”

Jaitley forecast that growth would accelerate to 8-8.5 percent in the fiscal year starting in April, up from 7.4 percent this year, under a budget unveiled on Saturday that focuses on stoking investments.

Sheth underscored the need for the government to work towards a timely rollout of its ambitious goods and services tax (GST), while saying more efficient direct cash subsidy transfers would also be important.

The continuing fiscal deficit, however, along with the deteriorating asset quality of public sector banks remain a constraint to India’s sovereign credit profile, Sheth added. (Reporting by Neha Dasgupta and Swati Bhat; Editing by Rafael Nam)

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