Moody's: Fiscal reform needed in India

Moody's Investors Service said that India's wide and persistent fiscal deficits could eventually compromise the country's macro-economic profile and that while the annual budget statement can set fiscal reform in motion, lasting fiscal relief will take persistent policy efforts over several years.

Moody's said in a new report that India's Baa3 rating incorporates India's fiscal drawbacks, including the dominance in revenue by highly growth-elastic taxes and rigidities in expenditure that prevent significant cuts, leading to heightened fiscal fragility during a slowdown in growth.

It also encompasses credit strengths, such as high GDP growth and savings rates, which allow the economy to absorb the government's large deficits, the agency said.

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