Amid all the debates going on, global rating agency Moody’s Investor Service has described ‘Food Security Bill’ as credit negative and a measure which could take toll on government finances and deteriorate macroeconomic situation.
As per the global rating agency, the measure is credit negative for Indian government as it will up government spending on food subsidies to about 1.2% of GDP per year from an earlier estimation of 0.8% currently, worsening the government's weak finances. Moody's currently has a 'Baa3' sovereign rating on India, its lowest investment-grade rating, with a 'stable' outlook.
Further, Moody has underscored that the bill, which is likely to be implemented in the remaining months of the current fiscal, although would have less impact on government finances in 2013-14, will weigh heavier in the coming years. The report added that the bill would raise food subsidy expenditure commitment, hindering government’s ability to consolidate its finances.
The Rs 1,35,000 crore Food Security bill, approved by the lower house of Parliament on Monday, seeks to provide cheap food-grains to the poor in the country with the annual financial burden after its implementation being estimated to be about Rs 1.30 lakh crore at current cost.
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