Budget to indicate policy priorities of coalition govt, says Moody's

The upcoming Union Budget will indicate the policy priorities for the upcoming coalition government and decide the growth trajectory for the next five years, Moody's Analytics said Friday.

"The union budget, due in the September quarter, will be an early indicator of policy priorities, including short- and long-term responses to some of those key economic challenges. Other key areas to watch include capital expenditure allocated to infrastructure development, manufacturing and social services," the global research firm noted.

Ratings agencies have pointed to concerns regarding reforms and fiscal metrics. The rating unit of Moody's, earlier this week, noted that a coalition government might delay economic and fiscal reforms, which could impede progress on fiscal consolidation.

The government had targeted to reduce fiscal deficit to 5.1% of GDP in the current fiscal compared with 5.6% in the previous year, with the goal to bring it down further to 4.5%.
On Friday, Narendra Modi was elected as the leader and prime minister elect at the NDA's parliamentary meeting.

BJP which has led a majority government over the last decade, fell short of 272 seats required for government formation in results announced earlier this week.

"The results mean dynamics are about to change in the parliament. Coalition partners will gain influence and leverage in policy decisions, allowing for a more inclusive approach to governance," Moody's Analytics said.

However, it also noted that negotiation and compromise required to run a cohesive government are expected to slow decision-making and dilute some key initiatives. "We will strive for consensus...ensuring that the country moves forward," Modi had noted at the NDA meet.