Analysts at Moody’s Investors Service said on Thursday that India’s debt affordability has not improved significantly after the government unveiled its last budget before upcoming elections, making it impossible to reconsider the policy. The country’s sovereign rating was upgraded.

“I think it’s worth remembering that the largest proportion of the EU budget is still devoted to interest payments,” Senior Vice President Christian de Guzman told Reuters in an interview.

“I think that’s why we’re continuing to keep the rating on hold because debt affordability has not improved significantly.”

Moody’s in August affirmed India’s “Baa3” rating with a stable outlook. A higher rating means lower economic risk, allowing a country to borrow at lower interest rates.

However, Guzman said it was positive that the government’s fiscal consolidation trend remained unchanged, but that more “aggressive” revenue-generating measures would be crucial to achieve the 4.5% fiscal deficit target by 2025/26.

Government spending may have to shoulder the burden of fiscal deficit consolidation, which could be challenging, he added.

Finance Minister Nirmala Sitharaman announced in the budget speech that India will slash the budget gap to 5.1% of gross domestic product (GDP) in 2024/25, while reducing the current fiscal year The budget gap was lowered by 10 basis points to 5.8%.

Guzman said India’s economic growth is “very healthy” and that should help the government maintain strong momentum in areas such as revenue generation.

Moody’s expects India’s real GDP to grow by 6.2% in 2024/25.

However, he said the government may have to support the economy due to concerns about global inflationary pressures, climate-related risks and geopolitical risks.

Guzman said Thursday’s interim budget meant the current government had a level of confidence “that they don’t need to really stimulate the economy to win this election.” Ratings agencies believe India will continue to maintain overall political stability, he added.

(This story has not been edited by News18 staff and is published from a Yonhap news agency feed – Reuters)