Fitch says electoral setback to test fiscal discipline

The government’s fiscal deficit has already reached 84 per cent of its stated target.

Written by Press Trust Of India | New Delhi | Published: December 11, 2013 1:57 am

Rating agency Fitch has expressed fear that the defeat of Congress in four of the five state elections could lead to higher fiscal deficit target as the government would be constrained to curb expenditure. “The setback faced by the Congress in state elections could potentially raise political pressure on the government’s near-term fiscal goals,” it said.

The government has committed to fiscal consolidation,it said adding,“but this commitment may be tested further as the deficit-reduction goals are stretched,and a steeper political struggle to pull in more votes may hinder the full scope of expenditure restraint.”

An evident anti-incumbency trend against the Congress could mean an increasing likelihood of political pressure to limit expenditure cut-backs,it said. For the current fiscal,the government has set fiscal deficit target of 4.8 per cent of the GDP. The government’s fiscal deficit has already reached 84 per cent of its stated target in the first seven months of the fiscal,versus 72 per cent over the same period a year ago.

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