The international ratings firm expects India to grow 6% on a real basis in FY24.
“In the emerging market economies universe, India has the strongest growth prospects and that’s true in the current fiscal year and we believe that is going to be true in the next year and 3-4 years too,” S&P’s sovereign analyst Andrew Wood told ET in an interview.
He said the virtuous cycle of investment would support consumption and the country would orient itself to developments such as supply chain diversification and become an important destination for foreign direct investment as well. On the fiscal side, Wood said the ratings firm’s perspective was that the country’s fiscal buffers were limited.
The Centre is working on a fiscal deficit of 5.9% of gross domestic product in the upcoming year, and something above 9% at the general government level. The government’s debt stock is hovering around 85% of GDP on a net basis.
“This is certainly at an elevated level. It also contributes to a higher interest burden that we have calculated at 27% of the government’s revenues,” he said. “What it means is that the fiscal profile or debt profile will remain on the weaker side,” he said, pointing out that high interest burden leads to credit weakness for sovereign ratings.
The FY24 budget presents a modest or gradual fiscal consolidation and strengthens the government’s capex programme and, overall, presents a few surprises for the ratings firm, Wood said.”From that perspective, we see the quality of the expenditure programme of the government improving on a marginal basis each year, but fiscal consolidation is modest or gradual,” he said.
From the agency’s perspective, expectations for the fiscal deficit for the next few years and debt dynamics haven’t changed in the context of this budget, he said.