Rating agencies approve of recovery push; eye on the deficit

• Assess whether the impact of investment spending growth is sufficient to offset higher-than-expected deficits and keep the debt ratio on a slightly declining path
• Beyond the investment campaign, budget short of major growth-enhancing structural reform announcements
• India has limited fiscal space as the country has the highest general government debt ratio of any BBB-rated emerging market sovereign.

HSBC

• Overall borrowing is expected to be high although lower than budgeted, which could put pressure on the bond market
• Divestment proceeds at `65,000 crore lower than markets expected but reasonable
• Investment target achievable despite its high level once Air India’s miscellaneous expenses are removed

DBS Group

• Traditional priorities accompanied by new segments such as sovereign green bonds, digital rupee, clean energy, etc.
• The pace of consolidation will be gradual, from -6.9% of GDP estimated for FY23 against -6.8% budgeted to -6.4% for FY22
• Modest divestment projections ‘biggest element of surprise in (budget) calculations’

Kotak Securities

• Large fiscal deficit and continued heavy reliance on the bond market to fund government borrowing to create upward pressure on the bond yield
• The government continued to focus on supply-side reforms
• No significant increase in central government spending compared to FY21-23 budget forecast

S&P Global Ratings

• FY23 budget, a government effort to support economic recovery, but fiscal consolidation ‘would be a big challenge for policymakers going forward’
• State-level deficits could increase pressure on the measure of the general government budget deficit
• Aggressive procurement to help restore the economy is expensive