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Journalism of Courage
Apprehending 8220;uncertainty8221; in implementation of key reforms like Goods and Services Tax and Direct Tax Codes by the government,global rating agencies have said the budgetary proposals fail to give a timeline on the same.
8220;While the Finance Minister announced various fiscal reforms,the timing of the implementation of key reform measures such as the Goods and Services Tax GST,Direct Tax Codes DTC,and the targeted direct subsidy disbursement remains uncertain,8221; Standard amp; Poor8217;s said.
Another rating agency Fitch said weak public finances are putting pressure on India8217;s sovereign rating.
8220;The government8217;s willingness and ability to implement it fiscal consolidation will be an important component of our assessment of its India rating. Implementation risk is high ahead of federal parliamentary elections in 2014,8221; Fitch said.
8220;Public finances have been deteriorating and remain a key weakness in India8217;s 8216;BBB-8216; rating,it said adding,8221;our outlook on the rating is Stable.8221;
The rating agencies were reacting to Finance Minister Pranab Mukherjee8217;s budgetary proposals for 2012-13 presented yesterday. They said the Budget did not offer much measures to rein in the fiscal deficit.
According to the budget,India8217;s fiscal deficit is estimated at 5.1 per cent of GDP in 2012-2013,compared with 5.9 per cent of GDP in the current financial year.
Samp;P said India8217;s deficit in the next fiscal is likely to remain high,and uncertainty surrounded the path to subsidy consolidation and to lowering fiscal vulnerability to volatile commodity prices.
Fitch also said the subsidy cap of 2 per cent of GDP set out in the budget would be positive for the country.
The Finance Minister announced proposals aimed at reducing the total size of subsidies to 2 per cent of GDP in 2012-2013,and further down to about 1.75 per cent of GDP in three years.
According to Samp;P,with a general election likely in 2014,the chances of India achieving a central government deficit target of 3 per cent of GDP for fiscals 2013-2014 and 2014-2015 seem remote.
The finance minister announced an amendment to the Fiscal Management and Budget Responsibility Act,2003 FRBM,which was suspended in March 2009.
8220;Depending on what the Act will cover,we expect the amended FRBM to enhance investors8217; confidence in the government8217;s commitment to fiscal consolidation,8221; it said.
