Moodys says Indian government's financial package is just modest

Source :Sify
Author :Finance Desk
Last Updated: Thu, Oct 15th, 2020, 13:57:27hrs
Nirmala Sitharaman

New Delhi: The Indian government's financial measures have been termed as "too less" and just "modest" by investor agency Moodys.

The agency was referring to the recent measures announced by the Finance ministry - the one on improving consumer spending and a package which was announced in May.

According to a Moody's report, the second round of fiscal stimulus was 0.2 percent of India's real GDP forecast for 2020-21.

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"We expect the general government debt burden to peak at around 90 per cent of GDP in 2020, up from about 72 per cent of GDP in 2019, which is significantly higher than the Baa median of around 59 per cent. The large debt burden is driven by chronically wide fiscal deficits."

While the latest stimulus will spur consumer spending over the near term as coronavirus-related restrictions continue to be eased and India's festive season begins, the support to growth will be minimal, it noted.

It forecasts growth to rebound to 10.6 per cent in the next financial year, reflecting the comparison with the low GDP levels of 2020 as economic activity gradually normalizes.

"Over the medium term, we expect growth to settle around 6 per cent, with downside risks due in part to ongoing stress within the financial system. A series of recent agricultural sector and labor law reforms, which were announced as part of broader structural reforms and approved by India's parliament in September, could provide support to medium-term growth, if implemented effectively," it added.