India's Interim Budget: Moody's on Fiscal Consolidation

New Delhi, Feb 1 (PTI) Moody's Investors Service on Thursday said the interim budget for 2024-25 firmly conveys the government's commitment to its fiscal consolidation goals, set against a backdrop of healthy economic growth.

Moody's Investors Service Senior Vice President Christian de Guzman said the government demonstrated fiscal restraint in not resorting to large handouts or increasing discretionary spending ahead of this year's elections.

"The government anticipates that reduced spending as a percentage of GDP will largely drive the reduction in the fiscal deficit, despite ongoing increases in planned infrastructure spending," Guzman said.

Given the challenging global environment and the potential for climate-related shocks, emerging spending needs not currently included in the budget could restrict the government's ability to meet its deficit target, he added.

Finance Minister Nirmala Sitharaman on Thursday announced a Rs 11.11 lakh crore spending on infrastructure and vowed to continue reforms as she resisted resorting to populist measures in Modi government's last Budget before general elections, instead choosing to stay on the path of cutting deficit while bolstering measures for focus groups.

Fiscal deficit in next financial year is estimated at 5.1 per cent of GDP, lower than 5.8 per cent in current fiscal.

"We continue on the path of fiscal consolidation, as announced in my Budget speech for 2021-22, to reduce fiscal deficit below 4.5 per cent by 2025-26," Sitharaman said.