January 21, 2019 / 7:40 AM / in 5 months

Fitch's India arm says farm support to raise states’ deficit in election year

Farmers plant saplings in a rice field on the outskirts of Srinagar June 10, 2015. REUTERS/Danish Ismail

NEW DELHI (Reuters) - The cumulative fiscal deficit of Indian states is expected to rise following the announcement of farm support packages ahead of national elections due by May, India Ratings and Research, the Indian arm of Fitch Ratings, said on Monday.

The aggregate budget deficit of Indian states is estimated to increase to 3.2 percent of gross domestic product in the next financial year beginning April, compared with 2.8 percent estimated for the current year, Devendra Pant, chief economist of India Ratings and Research, said.

“The competitive populism, in the nature of farm loan waivers and other financial support schemes, is hitting the capital spending and state finances,” he said.

Reporting by Manoj Kumar; Editing by Shreejay Sinha

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