Budget 2026 'tactical', not 'breakthrough', says Moody's Ratings

The economy is seen growing at 7.4% in the current financial year, with inflation likely to be near 2%

India's annual federal budget was "tactical" but not a "breakthrough", Moody's Ratings said in its reaction to a government roadmap for the next financial year.

Planned fiscal consolidation, which will bring the budget gap to 4.3% from 4.4% in the current year, will not change India's credit profile, Christian de Guzman, senior vice president at Moody's Ratings, told Reuters.

"(Despite India's) lengthening track record of deficit consolidation or fiscal discipline, this deficit is still wider than what it was prior to Covid," Guzman said.

"We haven't seen the fiscal metrics improve sufficiently enough to actually change the credit profile," he said.

The economy is seen growing at 7.4% in the current financial year, with inflation likely to be near 2%. The fiscal deficit for the year is set to be 4.4% of gross domestic product.

Moody's Ratings last year affirmed its long-term local and foreign-currency sovereign ratings for Indian and retained its "stable" outlook, citing sustained strength in its economy and reliable domestic funding for its budget deficits.