Login With Google
India likely to meet fiscal deficit target of 3.3%: Moody’s
Why in the news ?
- According to the rating agency Moody’s Investor Services, government is likely to meet its fiscal deficit target of 3.3% of gross domestic product (GDP) for fiscal year 2018-19.
- For FY18, the government had initially set the fiscal deficit target at 3.2% of GDP, but had later revised it to 3.5% of GDP.
More on news
- Moody’s had upgraded India’s sovereign rating last year to a notch above the lowest investment grade and changed the outlook from stable to positive.
- On the revenue side, Moody’s expects some downside risks to the government’ s assumption on collections from the goods and services tax (GST) and excise duty on petroleum products.
- The uncertainty around GST implementation and compliance could also result in potential losses, the rating agency said.
- Moody’s also highlighted that the government could reduce excise duty in view of the high oil prices and this could exert pressure on India’s sovereign credit profile.
- The rating agency’s Indian affiliate ICRA Ltd, too, expects high crude oil price to widen India’s current account deficit.
- According to ICRA, If global oil prices remain at current levels, India’s current account deficit to widen to 2.4% of GDP in FY2019 from 0.7% of GDP in FY2017.
- However, higher crude oil prices and a weaker rupee would improve remittances and the services trade surplus in FY2019, offsetting some of the adverse effects of rising commodity prices, it added.
Fiscal Deficit
- Fiscal deficit indicate the excess of government expenditure over receipts except borrowing.
- i.e. Fiscal deficit = Total Expenditure – Total Receipts except borrowings.
- Fiscal deficit represents the total borrowing requirements of the central government.
- Most importantly, fiscal deficit indicate the financial health of the budget and that of the government.
- Higher fiscal deficit thus becomes a matter of concern. On the other hand, a manageable fiscal deficit is a welcome sign.
Moody's
- Moody's is an essential component of the global capital markets, providing credit ratings, research, tools and analysis that contribute to transparent and integrated financial markets. Moody's Corporation (NYSE: MCO) is the parent company of Moody's Investors Service, which provides credit ratings and research covering debt instruments and securities, and Moody's Analytics, which offers leading-edge software, advisory services and research for credit and economic analysis and financial risk management.
Source
The Mint.