New Delhi: The interim budget could give some indication of the government’s commitment to fiscal consolidation, which is one of the main sensitivities in the sovereign rating, rating agency Fitch said on Thursday.
“Higher pre-election spending could risk a second consecutive year of fiscal slippage relative to the government’s targets and would further delay plans to reduce the high general government fiscal deficit and debt burden,” it said.
The final budget for the fiscal year ending in March 2020 (FY20) will be presented soon after the next government takes office following general elections, which are due by May 2019.
“Pressure for new expenditure to attract votes, particularly among rural and small-business owner voters, has increased as polls have shown the ruling BJP is becoming less assured of victory in the general elections,” said Fitch.
It said that BJP has reportedly lost votes in some recent state elections due to rural distress and public concerns over job creation.
“Targeted cash programmes appear the most likely form of support, as they would avoid downside risks of alternatives, such as the farm loan waivers that undermined the loan repayment culture in the past,” the agency said.
Fitch said that populist spending would aggravate fiscal pressures, which are already building due to revenue shortfalls so far in FY19. “Revenue from GST is well below target, for example,” it said.
