"India's fiscal position is very weak. Even if deficits targets are met, the fiscal position will be weaker. So, even meeting the target is not going to do much for the ratings and a slight miss is likely to do with context rather than policy action," Moody's Associate Managing Director for sovereign ratings Atsi Sheth told reporters here.
The global rating agency has a 'Baa3' rating with a positive outlook on the country.
"Between FY03 and FY08, the general fiscal deficit went down from 10 per cent of GDP to 4 per cent of GDP. But we did not change the rating upward," Sheth said.
"We did not do that because that projection was not policy-driven, but was growth-driven; it was very high nominal growth, very high corporate profitability and we did not think that it will be sustained."
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However, Moody's India affiliate ICRA said the pay revision for the central government employees and pensioners will pose a challenge to fiscal and inflation management.
"India enters 2016 on the cusp of a cyclical growth recovery, with inflation under control and the economy benefiting from lower commodity prices," she said.
However, trends like lower inflation, a steep fall in commodity prices (steel and crude oil are down 75 per cent) would only yield sustainable growth acceleration once corporate and bank balance sheets are repaired, and if the private sector remains internationally competitive, she added.
ICRA expects GDP to grow at 7.2 per cent in 2015-16 and 7.7 per cent in 2016-17.