However, it said that the ambitious target to narrow the deficit to 4.5% of GDP by fiscal 2025 is unlikely to be met in the absence of more material gains in revenue.
It said the continued emphasis on capital expenditure, which will rise 37% from last year, suggests improvement in the quality of spending.
“For the first time, such spending will exceed 20% of total budgeted expenditure in fiscal 2023, up from as low as 12.1% in fiscal 2020,” Moody’s said.
Separately, Fitch Ratings said higher spending, tax cuts and supportive policies announced in the budget will support sustained demand growth and improve longer-term prospects for a number of corporate sectors.
“We believe the tax cuts will boost consumer sentiment and maintain consumption growth, amid expectations of slower economic growth after the financial year ending March 31, 2023,” Fitch said.
Moody’s highlighted that notwithstanding some improvement in India’s fiscal position in recent years, a high debt burden and weak debt affordability remain key constraints that offset the country’s fundamental strengths, including high growth potential and deep domestic capital markets.