New Delhi : The government is likely to achieve its fiscal deficit target of 3.5 per cent of GDP in the current fiscal but higher infrastructure spending will limit the room to reduce it further to 3 per cent in 2017-18, Moody’s said on Monday.
The credit rating agency expects the government to renew its commitment to increase capital spending and address the short-term disruptive impact of demonetisation in the Budget to be unveiled on February 1, 2017.
“On the fiscal front, the government will likely remain committed to achieving its fiscal deficit target of 3.5 per cent of GDP for the fiscal year ending March 2017. However, room to reduce the deficit further to the target of 3 per cent of GDP in the following year will be limited, due to the need for increased infrastructure spending and higher government salaries,” Moody’s Investors Service said in a statement.
It said that in an environment of lacklustre global trade and with economies globally facing the increasing risk of protectionism, India’s very large domestic markets provide a relative competitive advantage when compared to smaller and more trade-reliant economies, reports PTI.
The implementation of the pending GST and other measures aimed at enhancing income declarations and tax collection will help widen India’s tax base and boost revenues, it said, adding that such a boost will, however, only materialise over time, with the magnitude uncertain at this point.
