Moody's worried about magnitude of food subsidies

Moody's worried about magnitude of food subsidies

Even before the government has got any success in getting the Food Security Bills passed in Parliament, rating agency Moody’s on Tuesday expressed concerns about the subsidy outgo on the UPA’s flagship programme and its impact on the exchequer.

“Moody's raised concern on subsidy on food bill rollout. We told them the subsidy bill is unlikely to be high,” Economic Affairs secretary Arvind Mayaram told reporters after Moody’s officials met the finance ministry officials to assess the country’s economic situation.

Implementation of National Food Security Bill is likely to cost the exchequer around Rs 1.23 lakh crore, according to government’s own estimates.

Moody’s was also informed that the government was taking many steps to deal with the fiscal issues. Some macro numbers have also improved after the rating agency last met the finance ministry officials in January. 

 "Its not as if the picture is fully rosy... We have said, there are problems but we are fully committed to improving the macro-economic numbers,” Mayaram said.

Last week, the agency had said India's sovereign outlook is stable and does not warrant any action on the country's credit rating in the next 12-18 months.

India’s economic growth is expected to come down to a decade’s low of 5 per cent in fiscal 2012-13. Inflation still hovers above the RBI’s comfort level, but the steps taken to reduce fiscal deficit in this year’s budget had somehow convinced the rating agencies of India taking credible steps to solve its macro-economic issues.

 However, the agencies believe that the reforms announced by the government since last September are positive but are modest steps that are unlikely to have any impact in the short term. They feel that high food inflation, infrastructure bottlenecks and high government deficits still remain pressure points.

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