India remains committed to reducing budget deficit over medium term: Fitch Ratings
The agency said India using RBI dividend to lower its fiscal deficit target for the fiscal year ending March 2025
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Fitch Ratings in a report has said that India remains committed to reducing the budget deficit over the medium term, despite its focus on higher public capex and demands of the coalition government. It said India has achieved or outperformed its budget deficit targets in the last few years, thereby improving its fiscal credibility.
The agency said India using RBI dividend to lower its fiscal deficit target for the fiscal year ending March 2025, reinforces its view that the country prefers fiscal consolidation over additional spending. It added still, India's deficit, and interest-to-revenue and debt ratios remain high compared with the 'BBB' category sovereign peers.
The rating agency said ‘...we believe its (India) government remains committed to reducing the budget deficit over the medium term, even amid the demands that governing in the coalition will impose on the newly elected administration - and despite the government's sustained focus on supporting economic growth through higher public capex’.
In the full Budget presented in July, the government lowered the fiscal deficit target to 4.9 per cent for the current financial year against 5.1 per cent estimated in February's interim Budget. In May, the RBI board approved a Rs 2.11 lakh crore dividend to the government for 2023-24 fiscal. Recently, Fitch Ratings affirmed India's sovereign rating at 'BBB-' with a stable outlook citing a strong medium-term growth outlook and solid external financing position.