Moody8217;s criticises Union budget

MUMBAI, MAR 1: Global rating agencies have taken divergent views about the Union Budget. While Moody's criticised the budget proposals, St...

MUMBAI, MAR 1: Global rating agencies have taken divergent views about the Union Budget. While Moody8217;s criticised the budget proposals, Standard amp; Poor8217;s termed it a cautious budget but in the right direction. An analyst at Moody8217;s Investors Service said India8217;s 2000/2001 April-March budget has not taken enough steps to cut down huge government expenditure despite increased expenditure on defence, debt servicing and a high subsidy bill.

Lindow expressed concern over 1999/2000 April-March fiscal deficit forecast at 5.6 per cent of gross domestic product, higher than the budgeted 4 per cent. quot;I am concerned if you look at the longer term perspective. We have seen that estimates tend to be revised upwards later. The fiscal deficit was indeed very large last year, so the base on which we are working is representing very problematic situation,quot; she said.

Lindow hailed the government8217;s decision to reduce its stake in the state-owned banks, and said the government should also reduce its interference in these banks. quot;If the divestment of two-thirds of public sector ownershipin the banks represents this definite direction reducing government8217;s interference, I think it would be very positive,quot; she said.

Indian finance Minister, in his budget proposals said the government8217;s stake in the state run banks will be reduced to 33 per cent, but without affecting the public sector character of these banks.

Samp;P says Budget modest but in right direction: 8216; Minister has presented a cautious budget and though the targets are modest it still remained to be seen how well it is implemented, a senior official at rating agency Standard amp; Poor8217;s said on Tuesday.

quot;India8217;s credit rating is constrained by its fiscal deficit8230;,quot; Joydeep Mukherji, Associate Director at the Sovereign Rating Group said. India has been rated below investment grade at BB with a stable outlook. quot;No one is expecting any major reduction but this time around he has set a modest target and with the support of a more stable government it has to be seen whether he can achieve the same,quot; he said.

Finance Minister Yashwant Sinha has set a fiscal deficit target of 5.1 percent for 2000/2001 April-March against 1999/2000 estimate of 5.6 percent, which will overshoot the original target of 4.0 percent.

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Mukherji said past governments had made loftier announcements and had ended up not achieving their targets and that the market was more sceptical this time. quot;It is a consolidation of the economic reforms process8230; it is not a dramatic budget but it is a step in the right direction,quot; he said.

The real test will be the implementation of the measures announced, he said. Many policy announcements were being made during the year and it was to be seen how the privatisation efforts and steps taken to cut subsidies will help the government in meeting its fiscal deficit targets, Mukherji said.