We remain quite concerned about the deteriorating fiscal position of the government and the weakening of an institutionalised commitment to fiscal reforms. These trends will worsen the government’s debt trajectory and could impair private investment prospects and ultimately damage India’s long-term growth potential.
At this point, we are not contemplating any outlook or rating changes. Many countries have taken counter-cyclical measures and India is not alone in doing so. However, you cannot say that everything the Indian government has done was a well-thought out counter-cyclical policy, as some of it was populist, and preceded the real necessity for more focused counter-cyclical steps. Let us wait for a quarter or two to assess the effectiveness of the current stimulative policies. By the time the new government takes office, we should know:
1) The effectiveness of the measures taken so far; and
2) The new government’s medium-term fiscal stance and policy objectives.
- Aninda Mitra,
V-P & Senior Analyst, Moody’s
(As told to Business Standard)
