S&P cuts FY05 GDP growth target to 6%

Global rating agency Standard & Poor's (S&P) has warned that India may not be able to achieve the Fiscal Responsibility and Budget Management (FRBM) target of axing fiscal deficit, and projected a lower growth of 6% this fiscal.

S&P, in its Asia-Pacific sovereign report card, said the budget for 2005-06 to be unveiled on February 28 is "likely to re-emphasis its resolve for fiscal consolidation, but spending plans would require better revenue generation capability."

Observing that the overall fiscal deficit was better due to debt-swap with states, it said: "The central government is unlikely to meet its own fiscal rules of cutting the budget deficit by 0.3% to 4.4% of GDP this fiscal."

Noting that revenue deficit was higher than the target levels, S&P said : "Small improvements in the central government revenue are likely to be overweighed by expenditure plans and deterioration in states' finances."

The economic numbers showed a mixed picture, but the underlying strength in the economy remains, the agency said. "GDP growth this fiscal ending March 31, 2005 is expected to be about 6%," it said, adding the country had the potential to grow by 7%.