Tighter FY20 Fiscal Deficit Target Challenging To Achieve: Moody's

Government's decision to slightly lower its fiscal deficit target for 2019/20 is a step in the right direction but will be challenging to achieve, a Moody's analyst said on Friday after the government announced its budget.

Finance Minister Nirmala Sitharaman said the government would cut its fiscal deficit target to 3.3 per cent of gross domestic product (GDP) for the year ending March 2020, from 3.4 per cent set in February, and said it would achieve 3 per cent by March 2021.

"I think overall it seems like there is some support in the budget to address the sluggish growth in the economy and that's going to make achieving a tighter fiscal deficit challenging," said Gene Fang, associate managing director, sovereign risk group, Moody's Investors Service.

"Despite the lower target we did pick up a lot of emphasis on support measures especially for low-income and farm workers and also some tax cuts in there," Fang said.

It also remained to be seen how much the target depends on one-off revenue such as divestments, he said.

He said the budget announcements did not change the rating agency's stance on India. Moody's rates India at "Baa2" with a "stable" outlook.