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No change in India's credit profile at present due to reduction in fiscal deficit, Fitch said after the budget
Fitch: The government lowered its current year fiscal deficit to 5.8% from 5.9% earlier in the interim Budget 2024–25 that was presented in Parliament on Thursday. The difference between government revenue and expenditure, or the fiscal deficit, is expected to decrease to 5.1% in 2024–2025 and 4.5% by 2025–2026.
Regarding India's budget, Fitch Ratings has voiced its opinion. The rating agency stated on Friday that India's sovereign credit profile remains unchanged even with a slight decrease in the fiscal deficit. The agency states that the government's focus on reducing the deficit will contribute to the medium-term stabilisation of the debt-to-GDP ratio.
In his post-Budget remarks, Fitch Ratings Director of Sovereign Ratings, Jeremy Zook, predicted that over the next five years, the Indian government's debt-to-GDP ratio will hover around 80% of GDP. This is predicated on both a steady nominal growth rate of roughly 10.5% of GDP and an ongoing decrease in the nominal deficit.
In the interim Budget 2024-25 presented in Parliament on Thursday, the government reduced its current year fiscal deficit to 5.8 per cent from 5.9 per cent earlier. Fiscal deficit, the difference between the government's revenue and expenditure, is projected to decline to 5.1 per cent in 2024-25 and 4.5 per cent by 2025-26. Fitch said these figures reflect the desire to keep the fiscal deficit low in an election year.
"The budget presented on Thursday was broadly in line with our expectations, although the deficit reduction was a little sharper than when we affirmed India's 'BBB-' rating with a stable outlook in January," Jeremy Zook said. “Momentum is visible.”
