S&P sees challenges to fiscal targets
International rating agency Standard & Poor’s has said that despite the low fiscal deficit assumed in the Union Budget, the country faces a host of challenges to the fiscal outlook, reports Our Bureau.
By TNN |
MUMBAI: International rating agency Standard & Poor���s has said that despite the low fiscal deficit assumed in the Union Budget, the country faces a host of challenges to the fiscal outlook, reports Our Bureau.
In a statement issued from Singapore in response to the Budget, the agency said the government may face a multitude of challenges in the coming months that could put pressure on this Budget���s fiscal-related targets. The agency warned that a reversal of the fiscal consolidation process, in tandem with a deterioration in the country���s balance of payments performance, could potentially put pressure on India���s credit standing.
The Budget assumes central government���s fiscal deficit for 2008-09 at 2.5% of GDP, compared with 3.1% in 2007-08. While this is better than the 3% target set out under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, the country faces a host of challenges to its fiscal outlook in the months ahead.
���The primary threat to India���s fiscal consolidation efforts stems from the Sixth Pay Commission, which will make its recommendations by April,��� S&P���s credit analyst Sani Hamid said. ���Recent fiscal gains, a cornerstone of the sovereign���s improved creditworthiness, could not only come under threat but be severely reversed by this pay review.���
Other challenges come from potential expenditure overruns and a sharperthan-expected economic slowdown. The latter would directly affect revenue receipts that have been the mainstay of the country���s fiscal consolidation. The agency also said that the government���s fiscal position was worse than portrayed because of the expenditure subsidies relating to oil and food and fertilisers are accounted for off-balance sheet..
In a statement issued from Singapore in response to the Budget, the agency said the government may face a multitude of challenges in the coming months that could put pressure on this Budget���s fiscal-related targets. The agency warned that a reversal of the fiscal consolidation process, in tandem with a deterioration in the country���s balance of payments performance, could potentially put pressure on India���s credit standing.
The Budget assumes central government���s fiscal deficit for 2008-09 at 2.5% of GDP, compared with 3.1% in 2007-08. While this is better than the 3% target set out under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, the country faces a host of challenges to its fiscal outlook in the months ahead.
���The primary threat to India���s fiscal consolidation efforts stems from the Sixth Pay Commission, which will make its recommendations by April,��� S&P���s credit analyst Sani Hamid said. ���Recent fiscal gains, a cornerstone of the sovereign���s improved creditworthiness, could not only come under threat but be severely reversed by this pay review.���
Other challenges come from potential expenditure overruns and a sharperthan-expected economic slowdown. The latter would directly affect revenue receipts that have been the mainstay of the country���s fiscal consolidation. The agency also said that the government���s fiscal position was worse than portrayed because of the expenditure subsidies relating to oil and food and fertilisers are accounted for off-balance sheet..
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