Rating agencies approve of recovery push; eye on the deficit

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By: ENS Economic Office | New Delhi |

February 3, 2022 4:55:22 a.m.





India has limited fiscal space as the country has the highest general government debt ratio of any BBB-rated emerging market sovereign.

fitch reviews

  • Assess whether the impact of investment spending growth is sufficient to offset higher-than-expected deficits and keep the debt ratio on a slightly declining path
  • Beyond the investment campaign, budget short of major growth-enhancing structural reform announcements
  • India has limited fiscal space as the country has the highest general government debt ratio of any BBB-rated emerging market sovereign.

HSBC

  • Overall borrowing is expected to be high although lower than budgeted, which could put pressure on the bond market
  • Divestment proceeds at `65,000 crore lower than markets expected but reasonable
  • Investment target achievable despite its high level once Air India’s miscellaneous expenses are removed

DBS Group

  • Traditional priorities accompanied by new segments such as sovereign green bonds, digital rupee, clean energy, etc.
  • The pace of consolidation will be gradual, from -6.9% of GDP estimated for FY23 against -6.8% budgeted to -6.4% for FY22
  • Modest divestment projections ‘biggest element of surprise in (budget) calculations’

Kotak Securities

  • Large fiscal deficit and continued heavy reliance on the bond market to fund government borrowing to create upward pressure on the bond yield
  • The government continued to focus on supply-side reforms
  • No significant increase in central government spending compared to FY21-23 budget forecast

S&P Global Ratings

  • FY23 budget, a government effort to support economic recovery, but fiscal consolidation ‘would be a big challenge for policymakers going forward’
  • State-level deficits could increase pressure on the measure of the general government budget deficit
  • Aggressive procurement to help restore the economy is expensive

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