Rocketing Fuel Subsidies Put Credit Rating At Risk

July 2008 | Economic Analysis

BMI View: We see a clear risk that the central fiscal deficit of INR1.33trn for FY2008/09 targeted by the government will be overshot as it cuts import tariffs and ups spending, bringing risks to India's credit rating. The main drag on public finances will, however, come from off-budget subsidies to oil and fertiliser retailers, which have skyrocketed this year as the government has shied away from raising regulated prices in tandem with the global oil price. The situation is likely to improve somewhat in FY2009/10 as the new government constrains spending.

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