Rating agency Moody's has termed ‘Budget 14-15’ as modestly credit positive for the country in absence of detailed implementation plan and additional measures to address macroeconomic imbalances. Finance Minister, though in his maiden budget vowed to contain fiscal deficit at 4.1% this year and lower it to 3% by 2016-17, but outlined no details on specific revenue and expenditures, which could shrink the deficit.
Nevertheless, rating agency noted that smaller fiscal deficit would be credit positive since India's weakening public finances have fuelled inflation, raised domestic interest rates and heightened macroeconomic imbalances, constraining sovereign credit quality. However, it underscored that absence of specifics made it difficult for them to assess the feasibility and sustainability of the fiscal consolidation effort.
Additionally, FM has unveiled slew of measures in the budget to support faster economic growth, such as allowing greater foreign direct investment in insurance and defence, increasing spending on infrastructure and introducing tax incentives for savings and investment were announced.
The rating agency described these as being credit positive for corporate and infrastructure, but underscored that their effect on overall GDP growth would be muted without a decline in inflation, interest rates and regulatory constraints on private investment. Moody's assigned a 'Baa3' rating on India, with a stable outlook.