While the interim budget emphasised on fiscal consolidation, it still does not call for a sovereign rating upgrade as the combined debt of the center and states is high, according to Moody's Christian de Guzman.
"We have stated that it would take very material debt reduction and continued high growth to upgrade the credit ratings of the country," Guzman, senior vice president-Sovereign Risk Group at Moody's Investor Services, told NDTV Profit.
Moody's sovereign credit ratings doesn't just look at the union budget but also that of the states, he said.
"Here, I think there is less evidence of more significant fiscal consolidation, given that the states have not exhibited the fiscal discipline that the union government has over the couple years." There has been progress, but it is still a weak point relative to where we see the union government progress, he said.
India has key strengths, like a good track record of macroeconomic and political stability, and recently a more stable banking system, according to Guzman. "There is a lot of strengths, but there are also weaknesses that have to be addressed for a rating upgrade."
The interim budget presented by the Finance Minster was more of a political statement in terms of what the speech represented, rather than a very detailed economic or fiscal plan, he said. "But, we do acknowledge that there is a very firm communication of that commitment of fiscal deficit consolidation."
Deficit consolidation is being driven by lower spending as a share of GDP, rather than increasing revenue, Guzman said. "On the revenue front, we did not see any significant revenue of tax measure," he said.
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