Moody's, ICRA launch India 2021 credit outlook

Moody's and ICRA have launched their India credit outlook for 2021. The duo believe that economic recovery is on track and higher fiscal spending will boost the rebound in the next financial year. CNBC-TV18's Ritu Singh discussed the credit outlook with Gene Fang of Moody's Investors Service, Aditi Nayar Principal Economist at ICRA, and Karthik Srinivasan of ICRA.

"We have seen a very encouraging rebound in the economy so far in India in the start of 2021 and we are forecasting quite an encouraging rebound of 13.7 percent in terms of growth for the fiscal year ending March 2022. When we look further ahead it is going to be about the ability of the economy to sustain the levels of medium-term growth that our consistent with our base line. We are forecasting 6.2 percent growth going forward beyond March 2022," Fang said.

"We do think that 6.8 percent deficit target seems very realistic. We do think that government has used rather conservative estimates for nominal gross domestic product (GDP) growth and their revenue targets are reasonable. We have considered the fact that a 4.5 percent deficit target in 2025-2026 incorporates rather modest degree of fiscal consolidation that is pegged into our assessment of overall government debt to GDP which we expect to stabilise at around just under 90 percent. What is important is that nominal growth is sufficient enough to allow for some degree of stabilisation around those levels going forward," the associate managing director at Moody's added.