Populist interim budget to further accelerate fiscal slippage: Fitch
New Delhi: Global ratings agency Fitch has warned against higher pre-election spending announcements in the upcoming interim budget which could risk a second consecutive year of fiscal slippage.
According to a note prepared by Fitch Ratings, pressure for new expenditure to attract votes, particularly among rural and small-business owner voters, has increased as polls have shown the ruling Bharatiya Janata Party (BJP) is becoming “less assured of victory in the general elections”.
“The BJP has reportedly lost votes in some recent state elections due to rural distress and public concerns over job creation,” the note dated January 30 said.
“Targeted cash programmes appear the most likely form of support, as they would avoid downside risks of alternatives, such as the farm loan waivers that undermined the loan repayment culture in the past.”
As per the note, populist spending would aggravate fiscal pressures, which are already building due to revenue shortfalls so far in FY19.
“Revenue from the new GST — an important structural reform due to its removal of barriers to trade across borders — is well below target…,” the note said