Budget slow on fiscal consolidation, ambitious on revenue target: S&P

According to the monthly Asia-Pacific Credit Focus, the govt will also look to cap subsidy expenditure in the upcoming year, against a surprise rise in FY23 owing to surging fertilizer and food prices

The Union Budget 2023-24 has an ambitious revenue growth assumption but maintains a slow and steady pace of fiscal consolidation, S&P Global said on Tuesday.

“Government’s revenue receipts target for FY24, is a little bit ambitious as it is higher than the growth (experienced) in FY23 amid expected slowing of economic growth and cooling inflation,” Andrew Wood, Director, Sovereign & International Public Finance Ratings, S&P Global Ratings said.

Wood said that India’s fiscal metrics (interest payment, debt-to-GDP ratio) have been very stable over the past 15 years and are going to remain within bounds over the next few years based on the government’s proposed fiscal glide path.

“It’s still a situation of relatively weak fiscal performance, high debt stock and considerable interest burden for the government, but one that’s not worsening going forward,” he added.

Wood said that the revenue story in India is pretty buoyant at the moment, with a good stepwise increase in revenue receipts generated by the government subsequently from FY22 to FY24.

According to the monthly Asia-Pacific Credit Focus released on Tuesday, the government will also look to cap subsidy expenditure in the upcoming year, against a surprise rise in FY23 owing to surging fertilizer and food prices.

“The budget is modestly supportive of growth dynamics, especially as investment will boost long-term productivity. Recalibration of personal income tax policies will also boost private consumption as macro headwinds mount,” the report said.

Abhishek Dangra, Senior Director & Sector Lead, Infrastructure Ratings at S&P Global Ratings said in specific sectors such as renewable energy and aviation, there is revival of private capex, but these trends will depend on the stability and profitability of these projects.