India budget leaves sovereign credit profile broadly unchanged: Moody’s

India’s Union budget left the sovereign credit profile broadly unchanged, with the pace of fiscal consolidation slowing to its weakest since the pandemic, Moody’s Ratings said today.

While the government has maintained a credible consolidation track record, the planned reduction in the fiscal deficit in 2026-27 is modest. “The government continues to demonstrate its commitment to—and a lengthening track record of—fiscal consolidation,” said Christian de Guzman, Senior Vice President at Moody’s, noting that the 0.1% narrowing of the deficit was the smallest annual improvement since the pandemic.

Moody’s added that tactical support to the economy, including infrastructure spending and recent measures such as GST rationalisation, would weigh on revenues and debt metrics. “We do not expect significant progress on debt reduction, which supplants deficit consolidation as the anchor for fiscal policy,” de Guzman said, adding that higher interest payments relative to revenue would worsen debt affordability.