MOODY'S, BARCLAYS EXPECT PARTIAL STIMULUS EASING IN INDIA BUDGET
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Leading global financial entities Moody's and Barclays Capital expect the Indian Government to partially roll back the stimulus packages in the forthcoming Budget, after the Reserve Bank of India (RBI) asked Delhi to withdraw some of these measures to bring about fiscal consolidation.
"The improving data on private demand is likely to encourage policymakers to gradually withdraw the stimulus measures. The RBI has already begun its exit strategy...fiscal authorities may opt to consolidate the public sector deficit in the upcoming Budget," Moody's economy.com said on Tuesday.
Finance Minister Pranab Mukherjee will present the Budget on February 26 this year, against the traditional last day of the month which this year being a holiday.
At the very least, authorities are likely to ensure that spending growth is modest enough so that the public sector deficit comes down from its current extraordinarily high levels, near 10 per cent of GDP on a combined Union and state basis, said Moody's economy.com associate economist Nikhilesh Bhattacharyya.
"Rising external demand should also prompt policymakers to withdraw stimulus, which is necessary to ensure private sector borrowing is not crowded out and high inflation does not persist. The US and Euro Zone appear to have begun gradual recoveries, while emerging market demand is rapidly recovering, especially in neighbouring China," he said.
Barclays Capital also said, "in the upcoming Budget, we expect the Government to pull back some of the fiscal support measures that were provided to domestic industry and export-oriented manufacturers."
(PTI)maz
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