Sitharaman to rating agencies after Budget: India is not just adhering to, but bettering its fiscal roadmap

Union finance minister Nirmala Sitharaman on Thursday said that the government is not only aligning with the fiscal consolidation roadmap given earlier but is also bettering it.

The remark from Sitharaman came during a press conference held after presentation of the interim Budget as a response to a question regarding her message to rating agencies' take on India.

Sitharaman said, "We are not only aligning with the fiscal consolidation roadmap that we gave earlier but are bettering it. It is that one simple statement that every rating agency should take on board."


Ratings agency Moody's Investors Service on Thursday said that India has not seen significant improvement in debt affordability to justify a rethink of the country's sovereign ratings upgrade, reported Reuters.

"I think it is worth bearing in mind that the largest proportion of the Union budget is still servicing interest payments," Senior Vice President Christian de Guzman told Reuters in an interview.

"I think this is why we continue to perhaps keep the rating where it is because there hasn't been as significant improvement in debt affordability."

Moody's in August had affirmed a 'Baa3' rating on India with a stable outlook. A higher rating implies lower economic risk, allowing a country to borrow at cheaper rates.

However, Guzman said the government's fiscal consolidation trend remains intact which is a positive, but more "proactive" measures on revenue generation will be critical to achieve the 4.5% fiscal deficit target by 2025/26.

Government expenditure may have to do the heavy-lifting on fiscal deficit consolidation which can prove to be challenging, he added.

India will reduce its budget gap sharply in 2024/25 to 5.1% of gross domestic product (GDP), Finance Minister Nirmala Sitharaman announced in her budget presentation, while revising the current fiscal year's gap lower by 10 basis points to 5.8%.

Economic growth in India is "very healthy," and that should help the government sustain a lot of momentum in areas such as revenue generation, Guzman said.

Moody's expects India's real gross domestic product to grow 6.2% in 2024/25.

(With inputs from agencies)