Global ratings agency, Moody’s said on Monday that Union Finance Minister P Chidambaram’s eighth Budget was ‘credit positive’.
Chidambaram has assured that he will be able to contain the widening fiscal deficit to 5.2 per cent in 2012-’13 and 4.8 per cent in 2013-14. “This plan of modest fiscal consolidation is credit positive for the sovereign because, against a backdrop of subdued GDP growth and upcoming elections, it is a realistic effort to correct India’s macroeconomic imbalances,” Moody’s said in its report on credit outlook for India.
Other global ratings agencies such as Standard and Poor’s and Fitch had given a negative outlook and threatened to downgrade the country’s sovereign credit rating to junk grade. Moody’s, however, has a BAA3 rating with a stable outlook for India.
Moody’s also added that the government’s fiscal consolidation could lead to monetary easing which would revive economic growth.
The agency, however, added that the extent of the monetary easing would be dependent on RBI. The central bank had said earlier that further rate cuts would be dependent on the government’s commitment to fiscal consolidation.