Budget targets can be achieved, say rating agencies

Reaffirm gradual fiscal consolidation

 Most of the fiscal and revenue targets set in the Budget are achievable and it reaffirms the government intent of gradual fiscal consolidation apart from signalling continued commitment to broad-base the reform agenda with a greater focus now on widening the tax base, says the global rating agency Fitch.

Another rating agency Moody’s expects the government to achieve its targets, based on achievable budget assumptions and demonstrated commitment to fiscal prudence, but also note that spending commitments are significant and structural hurdles to rapid increases in revenue collection are apparent,” Moody’s Investors Service said.

However, it expressed concern over the budgeting of lesser capital — Rs 10,000 crore — for infusion into public sector banks in 2017-18, which it said is a “credit negative”.

The government hopes to collect over Rs 19.06 lakh crore from taxes next fiscal. Of this, Rs 9.80 lakh crore is estimated to come from direct taxes and Rs 9.26 lakh crore from indirect taxes.

In a report titled ‘Budget continues gradual fiscal consolidation, targeted public investment’, Moody’s said the Budget provides modest economic support to low-income households, benefits the infrastructure sector with a boost in public spending and is generally supportive for business with its lower tax rates for micro enterprises and MSMEs.

“The merger of the previously separate Railway Budget and Union Budget and removal of the designation of Plan and non-Plan spending should improve Budget transparency and support the effectiveness of spending and revenue planning, moving forward,” Moody’s said.

“The decision to raise deficit target to 3.2% of GDP, from 3%, means slower near-term consolidation than was previously planned,” Fitch Ratings director for sovereigns Thomas Rookmaaker said in a note.