Moneycontrol
Last Updated : Jan 18, 2018 03:57 PM IST | Source: CNBC-TV18

Cut in government borrowing won’t impact sovereign rating: Moody’s

“The reduction will not really impact our fiscal deficit target estimate for India and hence is not too relevant to our sovereign rating."

CNBC TV18 @moneycontrolcom

CNBC TV-18

Ratings agency Moody's Investors Service has stated that the change in the borrowing of the government from Rs 50,000 crore to Rs 20,000 crore will not affect India's sovereign rating given.

According to the government, the reduction in borrowing was prompted by an expectation of further transfers of surplus cash from the Reserve Bank of India in the current fiscal ending March 31.

Marie Diron, Senior Vice President, Sovereign Risk Group at Moody's Investors Service, said that governments restructure their borrowing targets from time to time and the restructuring of the borrowing from Rs 50,000 crore to Rs 20,000 crore is a relatively small amount with respect to the size of India's economy.

Diron also mentioned that India's long maturity time frame of debt particularly insulated the country from fluctuations. Therefore, a change in the adjustment of its borrowing from one year to the other would not affect its overall cost of debt in the long run.

“The reduction will not really impact our fiscal deficit target estimate for India and hence is not too relevant to our sovereign rating."

Diron also said that Moody's expects the budget deficit to be a little higher

as the government calls for gradual fiscal consolidation.

She also mentioned that the Goods and Services Tax (GST) in itself is designed to be revenue neutral and the revenue accretion will happen due to greater compliance and greater productivity due to a simplified tax system.

"But we do not expect to see an immediate impact in the next fiscal year."

Moody’s noted that the Indian economy is seeing a recovery after temporary effects of demonetisation.

"We forecast a 7.5 percent growth in the GDP, or even higher given the momentum acquired from incomes catching up and productivity seen from a simplified tax structure."

For China, she says that Moody's expects a gradual slowdown. She said that the GDP growth is expected to be between 6 and 6.6 percent.China is planning to shift its growth towards the service sector which will cause an inevitable slowdown.

For full interview, watch accompanying video...
First Published on Jan 18, 2018 11:13 am

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