Moody&rsquo;s Ratings stripped the United States of its last top-tier credit rating on Friday, downgrading its long-term issuer rating from Aaa to Aa1. The move reflects mounting concern about America&rsquo;s ballooning debt and structural fiscal deficits, which the agency warned are on an unsustainable trajectory.
The downgrade places Moody&rsquo;s in line with its two major counterparts&mdash;S&amp;P and Fitch Ratings&mdash;which previously downgraded the US sovereign rating in 2011 and 2023, respectively. With the move, all three top credit rating agencies now assess US government debt below the highest grade.
Although Moody&rsquo;s affirmed that the US retains significant credit strengths&mdash;including its resilient economy, deep capital markets, and the global dominance of the US dollar&mdash;it said these no longer fully offset the weakening of America&rsquo;s fiscal health. The agency simultaneously changed the outlook on the rating to &ldquo;stable&rdquo;, suggesting no further immediate downgrade is expected.
In its statement, Moody&rsquo;s cited the failure of successive US administrations and Congress to agree on meaningful fiscal reforms, describing the trend of persistent annual deficits as a key driver of the downgrade.
&ldquo;We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration,&rdquo; the agency said.
The rating agency projects that the federal budget deficit will grow from 6.4 per cent of GDP in 2024 to nearly 9 per cent by 2035, driven by rising interest payments, increased entitlement spending, and relatively weak revenue generation.
Without reforms, the federal debt burden is expected to rise to 134 per cent of GDP by 2035&mdash;up from 98 per cent today&mdash;marking a sharp increase that would bring it close to post-World War II highs.
Moody&rsquo;s flagged the possibility that extending the 2017 Tax Cuts and Jobs Act, a central goal of the Republican-controlled Congress and President Donald Trump, would add about $4 trillion to the federal primary deficit (excluding interest payments) over the next decade. That alone, Moody&rsquo;s said, would materially worsen debt affordability and strain fiscal space further.
The agency noted that mandatory spending&mdash;including social security, medicare, and interest payments&mdash;is projected to account for nearly 78 per cent of total federal spending by 2035, up from 73 per cent today. Interest payments, in particular, are set to consume 30 per cent of all government revenue by 2035, compared to 18 per cent in 2024 and just 9 per cent in 2021.
<h2 dir="ltr">What will be the impact?</h2>
Though largely expected, the downgrade had an immediate, if modest, impact on financial markets. Yields on 10-year Treasury bonds rose to around 4.49 per cent in after-hours trading, while ETFs tracking longer-term treasury debt fell roughly 1 per cent. The broader equity market also responded, with the S&amp;P 500 ETF declining 0.4 per cent in post-market trading.
Market analysts said the downgrade could push up borrowing costs at the margin, as investors demand higher yields for holding US government debt. Others suggested the symbolic nature of the downgrade might have a limited effect due to the entrenched role of the US dollar and treasuries in global finance.
Still, the move highlights rising concerns about the sustainability of US debt and the political dysfunction that undermines efforts to address it. The announcement came shortly after the GOP-led House Budget Committee failed to advance a major tax-and-spending bill&mdash;one that aimed to extend the 2017 Trump tax cuts. The failure was due to opposition from hardline Republicans demanding steeper spending cuts.
Moody&rsquo;s downgrade also comes amid a wider debate over whether the US is losing its traditional fiscal discipline. Treasury Secretary Scott Bessent recently warned Congress that the country&rsquo;s debt trajectory was &ldquo;unsustainable,&rdquo; adding that a crisis could involve &ldquo;a sudden stop in the economy as credit would disappear.&rdquo;
<h2 dir="ltr">Concerns persist</h2>
Moody&rsquo;s emphasised that US institutions, including the Federal Reserve and the constitutional separation of powers, remain strong and are key stabilising factors. However, the agency noted that recent political dysfunction has hampered the policymaking process and created uncertainty over the government&rsquo;s ability to enact long-term fiscal reforms.
&ldquo;Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,&rdquo; Moody&rsquo;s wrote. It warned that without bipartisan action on spending and revenue, the situation would continue to deteriorate.
Analysts also warned that continued reliance on foreign capital to fund US debt&mdash;combined with declining demand for treasuries and heightened geopolitical tensions&mdash;could eventually erode investor confidence.
Although Moody&rsquo;s still sees the US dollar as the dominant reserve currency for the foreseeable future, any shock that triggers a rapid investor pullback could deepen fiscal risks and accelerate the debt crisis.
<h2 dir="ltr">Looking ahead</h2>
Moody&rsquo;s stated that the US still has time and institutional capacity to reverse its fiscal trajectory, particularly if bipartisan reforms can be enacted to increase revenue or curb spending growth. A credible long-term fiscal plan could eventually lead to an upgrade in the rating, the agency said.
On the other hand, a faster-than-expected deterioration in debt metrics&mdash;or a significant erosion in policy credibility and investor confidence&mdash;could prompt further rating actions in the future. While the current rating outlook is stable, Moody&rsquo;s made clear that risks remain tilted toward fiscal deterioration unless political leaders make difficult decisions soon.
In the absence of such action, the downgrade stands as a stark warning: the world&rsquo;s largest economy can no longer count on its historical fiscal reputation alone to preserve its top credit standing.

Business & Economy: Moody's projects the budget deficit will grow to nearly 9 per cent by 2035, driven by interest payments, entitlement spending, weak revenue generation

Moody’s Ratings stripped the United States of its last top-tier credit rating on Friday, downgrading its long-term issuer rating from Aaa to Aa1. The move reflects mounting concern about America’s ballooning debt and structural fiscal deficits, which the agency warned are on an unsustainable trajectory. The downgrade places Moody’s in line with its two major counterparts—S&P and Fitch Ratings—which previously downgraded the US sovereign rating in 2011 and 2023, respectively. With the move, all three top credit rating agencies now assess US government debt below the highest grade. Although Moody’s affirmed that the US retains significant credit strengths—including its resilient economy, deep capital markets, and the global dominance of the US dollar—it said these no longer fully offset the weakening of America’s fiscal health. The agency simultaneously changed the outlook on the rating to “stable”, suggesting no further immediate downgrade is expected. In its statement, Moody’s cited the failure of successive US administrations and Congress to agree on meaningful fiscal reforms, describing the trend of persistent annual deficits as a key driver of the downgrade. “We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration,” the agency said. The rating agency projects that the federal budget deficit will grow from 6.4 per cent of GDP in 2024 to nearly 9 per cent by 2035, driven by rising interest payments, increased entitlement spending, and relatively weak revenue generation. Without reforms, the federal debt burden is expected to rise to 134 per cent of GDP by 2035—up from 98 per cent today—marking a sharp increase that would bring it close to post-World War II highs. Moody’s flagged the possibility that extending the 2017 Tax Cuts and Jobs Act, a central goal of the Republican-controlled Congress and President Donald Trump, would add about $4 trillion to the federal primary deficit (excluding interest payments) over the next decade. That alone, Moody’s said, would materially worsen debt affordability and strain fiscal space further. The agency noted that mandatory spending—including social security, medicare, and interest payments—is projected to account for nearly 78 per cent of total federal spending by 2035, up from 73 per cent today. Interest payments, in particular, are set to consume 30 per cent of all government revenue by 2035, compared to 18 per cent in 2024 and just 9 per cent in 2021. What will be the impact? Though largely expected, the downgrade had an immediate, if modest, impact on financial markets. Yields on 10-year Treasury bonds rose to around 4.49 per cent in after-hours trading, while ETFs tracking longer-term treasury debt fell roughly 1 per cent. The broader equity market also responded, with the S&P 500 ETF declining 0.4 per cent in post-market trading. Market analysts said the downgrade could push up borrowing costs at the margin, as investors demand higher yields for holding US government debt. Others suggested the symbolic nature of the downgrade might have a limited effect due to the entrenched role of the US dollar and treasuries in global finance. Still, the move highlights rising concerns about the sustainability of US debt and the political dysfunction that undermines efforts to address it. The announcement came shortly after the GOP-led House Budget Committee failed to advance a major tax-and-spending bill—one that aimed to extend the 2017 Trump tax cuts. The failure was due to opposition from hardline Republicans demanding steeper spending cuts. Moody’s downgrade also comes amid a wider debate over whether the US is losing its traditional fiscal discipline. Treasury Secretary Scott Bessent recently warned Congress that the country’s debt trajectory was “unsustainable,” adding that a crisis could involve “a sudden stop in the economy as credit would disappear.” Concerns persist Moody’s emphasised that US institutions, including the Federal Reserve and the constitutional separation of powers, remain strong and are key stabilising factors. However, the agency noted that recent political dysfunction has hampered the policymaking process and created uncertainty over the government’s ability to enact long-term fiscal reforms. “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” Moody’s wrote. It warned that without bipartisan action on spending and revenue, the situation would continue to deteriorate. Analysts also warned that continued reliance on foreign capital to fund US debt—combined with declining demand for treasuries and heightened geopolitical tensions—could eventually erode investor confidence. Although Moody’s still sees the US dollar as the dominant reserve currency for the foreseeable future, any shock that triggers a rapid investor pullback could deepen fiscal risks and accelerate the debt crisis. Looking ahead Moody’s stated that the US still has time and institutional capacity to reverse its fiscal trajectory, particularly if bipartisan reforms can be enacted to increase revenue or curb spending growth. A credible long-term fiscal plan could eventually lead to an upgrade in the rating, the agency said. On the other hand, a faster-than-expected deterioration in debt metrics—or a significant erosion in policy credibility and investor confidence—could prompt further rating actions in the future. While the current rating outlook is stable, Moody’s made clear that risks remain tilted toward fiscal deterioration unless political leaders make difficult decisions soon. In the absence of such action, the downgrade stands as a stark warning: the world’s largest economy can no longer count on its historical fiscal reputation alone to preserve its top credit standing.

Moody’s downgrades US credit rating over mounting debt, fiscal gridlock

Amazon has reported its first quarterly loss since 2015, its money-making juggernaut stalled by a slowdown in pandemic-induced online shopping and a huge write-down of its investment in an electric-vehicle startup.

The Seattle-based e-commerce giant's stock fell 9 per cent&nbsp;on Thursday in after-hours trading.

Amazon reported a loss of $3.84 billion, or $7.56 a share, for the first three months of the year. A year ago, it reported a profit of $8.1 billion, or $15.79 a share, for the first quarter. Wall Street analysts expected a profit of $8.35 a share in the latest quarter, according to FactSet.

Also read |&nbsp;<a href="https://www.wionews.com/world/amazon-workers-in-small-new-jersey-facility-file-for-union-election-472118">Amazon workers in small New Jersey facility file for union election</a>

The ocean of red ink in Amazon's report came mostly from the company's accounting for a $7.6 billion loss in value of its stock investment in Rivian Automotive. Rivian went public in late 2021 and its stock traded at close $180 at one point. It closed Thursday at $32.18. Ford Motor Co reported a similar write-down of the value of its Rivian investment Wednesday.

Amazon's e-commerce business also reported an operating loss of $1.57 billion in North America and $1.28 billion internationally.

Meanwhile, sales at Amazon's cloud-computing business, which helps power the online operations of Netflix, McDonald's and other companies, grew 37 per cent in the quarter. And sales in its advertising business, where brands pay to get their products to show up first when shoppers search on Amazon's site, rose 25 per cent.

Still, the slowdown in online spending is real and broad-based. While in-store sales rose, March is the first month to show decline in online sales since the pandemic began, according to Mastercard SpendingPulse, which tracks spending made over the Mastercard payments network and survey estimates for other payments made with cash and checks.

Amazon prospered during the COVID-19 pandemic as homebound people eager to limit human contact turned online to purchase what they need. But growth has slowed as vaccinated Americans feel more comfortable going out. According to the e-commerce research firm MarketPlace Pulse, the value of goods sold on Amazon last year grew by half the rate compared to 2020.

Watch |&nbsp;Amazon's new union demands company start bargaining in early May

<div class="videoWrapper trancodeVideo"><iframe allowfullscreen="" autoplay="1" class="includeVideo" frameborder="0" height="350" src="https://www.wionews.com/videos/amazons-new-union-demands-company-start-bargaining-in-early-may-468164/embed" style="width:100%;max-width:560px;" width="560"></iframe></div>

Like many others, Amazon is dealing with pressure from inflation and supply-chain issues. In the past two years, Amazon's Chief Financial Officer Brian Olsavsky said the company has doubled the size of its operations and nearly doubled its workforce.

He said labour shortages and a lack of physical space are no longer major issues, but the company continues to face a variety of pressures such as increased shipping costs.

Inflation-related expenses added roughly $2 billion of incremental costs when compared to last year, Olsavsky said, adding that the company also incurred another $4 billion in costs related to productivity loss and other inefficiencies.

The pandemic and subsequent war in Ukraine have brought unusual growth and challenges,&nbsp;said Amazon CEO Andy Jassy in a statement. Our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network. We know how to do this and have done it before.

To offset rising fuel costs and inflation, the retail giant has added a 5 per cent&nbsp;surcharge to fees it charges third-party sellers who use its fulfillment services. Last quarter, Amazon also hiked its annual Prime membership fee by $20, a first since 2018. Despite the fee hike, Olsavsky said millions of new Prime members have enrolled during the quarter.

Revenue rose 7 per cent&nbsp;to $116.44 billion, compared with $108.52 billion in first quarter 2021, representing the company's sixth consecutive quarter of revenue topping $100 billion. Amazon had projected sales between $112 billion and $117 billion. Analysts surveyed by FactSet were expecting $116.5 billion.

WATCH&nbsp;WION LIVE HERE:

<iframe allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="350" src="https://www.wionews.com/live-tv/embed?autoplay=1&amp;mute=1" width="100%"></iframe>

Given the pace at which the business grew over the past few years this shift is hardly surprising," said Neil Saunders, managing director of GlobalData Retail.

"It represents more of a post pandemic reset than catastrophic failure. Nevertheless, the slowdown raises important questions over how Amazon can restore momentum and regain its leadership position as one of the primary drivers of online growth.

Amazon said it forecasts sales for the current quarter to range between $116 billion and $121 billion, below the $125.33 billion that analysts are forecasting.

The results come as Amazon is closing all of its brick-and-mortar bookstores, as well as its 4-star shops and pop up locations, as the online retail behemoth reworks its physical footprint. The company also faces a growing unionisation push from inside its workforce.

Also read |&nbsp;<a href="https://www.wionews.com/world/amazon-calls-for-election-re-run-after-workers-voted-for-first-us-union-469893">Amazon calls for election re-run after workers voted for first US union</a>

A second union election is currently underway at a company warehouse on Staten Island, New York, the same borough where workers at a nearby facility voted to unionise earlier this month. Amazon has filed objections over the election with the National

Labour Relations Board and is seeking to re-do the vote.

The final outcome of a separate union election in Bessemer, Alabama, is still up in the air with 416 outstanding challenged ballots hanging in the balance. Hearings to review the ballots are expected to begin in the coming weeks.

Amazon has reported its first quarterly loss since 2015, its money-making juggernaut stalled by a slowdown in pandemic-induced online shopping and a huge write-down of its investment in an electric-vehicle startup.

Amazon has reported its first quarterly loss since 2015, its money-making juggernaut stalled by a slowdown in pandemic-induced online shopping and a huge write-down of its investment in an electric-vehicle startup. The Seattle-based e-commerce giant's stock fell 9 per cent on Thursday in after-hours trading. Amazon reported a loss of $3.84 billion, or $7.56 a share, for the first three months of the year. A year ago, it reported a profit of $8.1 billion, or $15.79 a share, for the first quarter. Wall Street analysts expected a profit of $8.35 a share in the latest quarter, according to FactSet. Also read | Amazon workers in small New Jersey facility file for union election The ocean of red ink in Amazon's report came mostly from the company's accounting for a $7.6 billion loss in value of its stock investment in Rivian Automotive. Rivian went public in late 2021 and its stock traded at close $180 at one point. It closed Thursday at $32.18. Ford Motor Co reported a similar write-down of the value of its Rivian investment Wednesday. Amazon's e-commerce business also reported an operating loss of $1.57 billion in North America and $1.28 billion internationally. Meanwhile, sales at Amazon's cloud-computing business, which helps power the online operations of Netflix, McDonald's and other companies, grew 37 per cent in the quarter. And sales in its advertising business, where brands pay to get their products to show up first when shoppers search on Amazon's site, rose 25 per cent. Still, the slowdown in online spending is real and broad-based. While in-store sales rose, March is the first month to show decline in online sales since the pandemic began, according to Mastercard SpendingPulse, which tracks spending made over the Mastercard payments network and survey estimates for other payments made with cash and checks. Amazon prospered during the COVID-19 pandemic as homebound people eager to limit human contact turned online to purchase what they need. But growth has slowed as vaccinated Americans feel more comfortable going out. According to the e-commerce research firm MarketPlace Pulse, the value of goods sold on Amazon last year grew by half the rate compared to 2020. Watch | Amazon's new union demands company start bargaining in early May Like many others, Amazon is dealing with pressure from inflation and supply-chain issues. In the past two years, Amazon's Chief Financial Officer Brian Olsavsky said the company has doubled the size of its operations and nearly doubled its workforce. He said labour shortages and a lack of physical space are no longer major issues, but the company continues to face a variety of pressures such as increased shipping costs. Inflation-related expenses added roughly $2 billion of incremental costs when compared to last year, Olsavsky said, adding that the company also incurred another $4 billion in costs related to productivity loss and other inefficiencies. The pandemic and subsequent war in Ukraine have brought unusual growth and challenges, said Amazon CEO Andy Jassy in a statement. Our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network. We know how to do this and have done it before. To offset rising fuel costs and inflation, the retail giant has added a 5 per cent surcharge to fees it charges third-party sellers who use its fulfillment services. Last quarter, Amazon also hiked its annual Prime membership fee by $20, a first since 2018. Despite the fee hike, Olsavsky said millions of new Prime members have enrolled during the quarter. Revenue rose 7 per cent to $116.44 billion, compared with $108.52 billion in first quarter 2021, representing the company's sixth consecutive quarter of revenue topping $100 billion. Amazon had projected sales between $112 billion and $117 billion. Analysts surveyed by FactSet were expecting $116.5 billion. WATCH WION LIVE HERE: Given the pace at which the business grew over the past few years this shift is hardly surprising," said Neil Saunders, managing director of GlobalData Retail. "It represents more of a post pandemic reset than catastrophic failure. Nevertheless, the slowdown raises important questions over how Amazon can restore momentum and regain its leadership position as one of the primary drivers of online growth. Amazon said it forecasts sales for the current quarter to range between $116 billion and $121 billion, below the $125.33 billion that analysts are forecasting. The results come as Amazon is closing all of its brick-and-mortar bookstores, as well as its 4-star shops and pop up locations, as the online retail behemoth reworks its physical footprint. The company also faces a growing unionisation push from inside its workforce. Also read | Amazon calls for election re-run after workers voted for first US union A second union election is currently underway at a company warehouse on Staten Island, New York, the same borough where workers at a nearby facility voted to unionise earlier this month. Amazon has filed objections over the election with the National Labour Relations Board and is seeking to re-do the vote. The final outcome of a separate union election in Bessemer, Alabama, is still up in the air with 416 outstanding challenged ballots hanging in the balance. Hearings to review the ballots are expected to begin in the coming weeks.

Amazon reports rare quarterly loss as online shopping slows

India will not revise its fiscal deficit target immediately and is not planning any spending cuts at this stage, finance minister Nirmala Sitharaman said on Sunday, after slashing corporate tax rates to boost a flagging economy.

India cut corporate tax rates on Friday in a surprise move designed to woo manufacturers, revive private investment and lift growth from a six-year low.

Though equity markets welcomed the move, bond yields spiked to a nearly three-month high on speculation the government may have to borrow more to meet its spending needs.

The measures will cut revenue by 1.45 trillion rupees ($20.4 billion) in the current fiscal year, according to government estimates.

But Finance Minister Nirmala Sitharaman said the government would only review the fiscal deficit target closer to the 2020/21 budget.

"At this point of time we are not revising any target. The decision will be taken later," she told reporters at her residence in New Delhi on Sunday, adding that there was no plan to cut spending currently.

Sitharaman also said the government would decide on additional market borrowings for the second half of 2019/20 later.

Ratings firm S&amp;P Global said on Friday India`s move to cut corporate tax rates was a "credit negative development" despite potentially boosting the economy as it will widen its fiscal deficit.

Government sources told Reuters this month that India is likely to miss its fiscal deficit target for the current financial year and, toward the end of 2019, be forced to raise it to 3.5 per cent of GDP from 3.3 per cent after economic growth fell to a six-year low of 5 per cent in the April-June quarter. 
&nbsp;

India will not revise its fiscal deficit target immediately and is not planning any spending cuts at this stage, finance minister Nirmala Sitharaman said on Sunday, after slashing corporate tax rates to boost a flagging economy.

India will not revise its fiscal deficit target immediately and is not planning any spending cuts at this stage, finance minister Nirmala Sitharaman said on Sunday, after slashing corporate tax rates to boost a flagging economy. India cut corporate tax rates on Friday in a surprise move designed to woo manufacturers, revive private investment and lift growth from a six-year low. Though equity markets welcomed the move, bond yields spiked to a nearly three-month high on speculation the government may have to borrow more to meet its spending needs. The measures will cut revenue by 1.45 trillion rupees ($20.4 billion) in the current fiscal year, according to government estimates. But Finance Minister Nirmala Sitharaman said the government would only review the fiscal deficit target closer to the 2020/21 budget. "At this point of time we are not revising any target. The decision will be taken later," she told reporters at her residence in New Delhi on Sunday, adding that there was no plan to cut spending currently. Sitharaman also said the government would decide on additional market borrowings for the second half of 2019/20 later. Ratings firm S&P Global said on Friday India`s move to cut corporate tax rates was a "credit negative development" despite potentially boosting the economy as it will widen its fiscal deficit. Government sources told Reuters this month that India is likely to miss its fiscal deficit target for the current financial year and, toward the end of 2019, be forced to raise it to 3.5 per cent of GDP from 3.3 per cent after economic growth fell to a six-year low of 5 per cent in the April-June quarter.

No plans to revise fiscal deficit target or cut spending now: Finance Minister

The government will find it difficult to meet the fiscal deficit target of 3.4 per cent in 2019-20 on account on higher spending and low revenue growth, Moody's Investors Service said.

Observing that Indian government's debt is "stubbornly high" as a percentage of GDP, Moody's Investors Service Managing Director, Sovereign Risk Group, Gene Fang said it could be brought down only if the Centre sticks to the fiscal consolidation path.

Deviating from the path laid down in the Fiscal Responsibility and Budget Management (FRBM) Act, the government has pegged the fiscal deficit for the next financial year at 3.4 per cent of GDP, as against the original target of 3.1 per cent.

"While the government's growth assumptions appear reasonable, we think the government will continue to face challenges in meeting its fiscal targets, primarily due to structural increases in spending and difficulties in raising revenue further," Fang told PTI in an interview.

Fang said the 3.4 per cent fiscal deficit target for the year ending March 2020 is wider than expected, largely driven by increased spending to provide income support to small farmers and tax rebates ahead of the general elections in April-May this year.

The Interim Budget for 2019-20 doled out a scheme under which farmers holding up to 2 hectares of land would get an annual payout of Rs 6,000 -- a move intended to benefit about 12 crore farmers, among other measures for middle-class taxpayers.

However, there was a 0.1 per cent slip in the fiscal deficit estimate for the current financial year to 3.4 per cent.

While presenting the Budget, Finance Minister Piyush Goyal had said the government has provided Rs 20,000 crore in 2018-19 and Rs 75,000 crore in 2019-20 for providing income support to farmers, which has led to the slippage in the fiscal deficit.

Asked if India risks a rating downgrade following the breach in fiscal deficit target, Moody's said the country's 'Baa2' rating has a 'Stable' outlook, which indicates a balance of upside and downside risks.

"India's government debt remains stubbornly high as a per cent of GDP, but it's mostly domestically funded with a relatively long dated maturity structure.&nbsp;

India's economic growth also offers the potential to bring debt/GDP down, but only if the medium-term fiscal objectives of the FRBM are realised," Fang said.

As per the FRBM Act, debt-to-GDP ratio was to be brought down to 40 per cent by 2024-25 from 50.1 per cent in 2017-18.

In the 2018-19 Budget, the government had targeted to reduce its debt-to-GDP ratio to 48.8 per cent in 2018-19, 46.7 per cent in 2019-20 and 44.6 per cent in 2020-21, while fiscal deficit as a percentage of GDP was targeted to be reduced to 3.3 per cent, 3.1 per cent and 3 per cent, respectively during the same period.

US-based ratings agency Moody's had in 2017 upped India's rating to Baa2 from Baa3, changing outlook to 'stable' from 'positive', and said that reforms will help stabilise rising levels of debt.

The government will find it difficult to meet the fiscal deficit target of 3.4 per cent in 2019-20 on account on higher spending and low revenue growth, Moody's Investors Service said.

The government will find it difficult to meet the fiscal deficit target of 3.4 per cent in 2019-20 on account on higher spending and low revenue growth, Moody's Investors Service said. Observing that Indian government's debt is "stubbornly high" as a percentage of GDP, Moody's Investors Service Managing Director, Sovereign Risk Group, Gene Fang said it could be brought down only if the Centre sticks to the fiscal consolidation path. Deviating from the path laid down in the Fiscal Responsibility and Budget Management (FRBM) Act, the government has pegged the fiscal deficit for the next financial year at 3.4 per cent of GDP, as against the original target of 3.1 per cent. "While the government's growth assumptions appear reasonable, we think the government will continue to face challenges in meeting its fiscal targets, primarily due to structural increases in spending and difficulties in raising revenue further," Fang told PTI in an interview. Fang said the 3.4 per cent fiscal deficit target for the year ending March 2020 is wider than expected, largely driven by increased spending to provide income support to small farmers and tax rebates ahead of the general elections in April-May this year. The Interim Budget for 2019-20 doled out a scheme under which farmers holding up to 2 hectares of land would get an annual payout of Rs 6,000 -- a move intended to benefit about 12 crore farmers, among other measures for middle-class taxpayers. However, there was a 0.1 per cent slip in the fiscal deficit estimate for the current financial year to 3.4 per cent. While presenting the Budget, Finance Minister Piyush Goyal had said the government has provided Rs 20,000 crore in 2018-19 and Rs 75,000 crore in 2019-20 for providing income support to farmers, which has led to the slippage in the fiscal deficit. Asked if India risks a rating downgrade following the breach in fiscal deficit target, Moody's said the country's 'Baa2' rating has a 'Stable' outlook, which indicates a balance of upside and downside risks. "India's government debt remains stubbornly high as a per cent of GDP, but it's mostly domestically funded with a relatively long dated maturity structure. India's economic growth also offers the potential to bring debt/GDP down, but only if the medium-term fiscal objectives of the FRBM are realised," Fang said. As per the FRBM Act, debt-to-GDP ratio was to be brought down to 40 per cent by 2024-25 from 50.1 per cent in 2017-18. In the 2018-19 Budget, the government had targeted to reduce its debt-to-GDP ratio to 48.8 per cent in 2018-19, 46.7 per cent in 2019-20 and 44.6 per cent in 2020-21, while fiscal deficit as a percentage of GDP was targeted to be reduced to 3.3 per cent, 3.1 per cent and 3 per cent, respectively during the same period. US-based ratings agency Moody's had in 2017 upped India's rating to Baa2 from Baa3, changing outlook to 'stable' from 'positive', and said that reforms will help stabilise rising levels of debt.

Difficult for govt to maintain 3.4% fiscal deficit in FY'20: Moody's

Indian shares edged lower on Friday as economic growth data came in largely as expected, failing to boost a market weighed down by concerns about the country`s fiscal deficit and global risk factors such as rising crude prices. 
 
Data late on Thursday showed India`s gross domestic product grew 6.3 percent in July-September, in line with expectations, as businesses started to overcome troubles after the bumpy launch of a national sales tax.

The data failed to lift sentiment after India reported its fiscal deficit reached 96 percent of the budgeted target for the fiscal year ending in March 2018, sending shares sharply lower on Thursday. The Reserve Bank of India (RBI) is also meeting next week at a time of rising concern about a rally in crude prices, which rose following OPEC`s decision to extend production curbs.

Nearly all analysts expect the central bank to keep rates on hold.&nbsp;

&quot;Since there was a sharp run-up in the markets last week, there is a bit of profit-booking. Even though the GDP number is along expected lines, there is concern building up on the fiscal deficit front,&quot; said Hitesh Agarwal, EVP &amp; Head &ndash; Retail Research, Religare Securities Ltd.

The broader NSE Nifty was down 0.15 percent at 10,211.40 as of 0644 GMT, while the benchmark BSE Sensex was 0.12 percent lower at 33,108.34. Both indexes were down around 1.7 percent for the week, heading for their biggest weekly loss since late September.

Indiabulls Housing Finance Ltd led losses on the NSE index, falling as much as 2.1 percent. The stock had gained in the last five sessions. Banking stocks weighed on both indexes ahead of the RBI meeting. State Bank of India fell as much as 0.9 percent while ICICI Bank Ltd lost 0.8 percent.

However, the Nifty auto index gained about 1 percent as automakers reported sales for November. A private survey on Friday showed factory activity accelerated last month to the fastest pace since late last year, driven by a surge in new orders.

Maruti Suzuki India Ltd rose 1.1 percent after posting a 14 percent rise in November sales. Tata Motors Ltd, expected to report later in the day, rose as much as 1.4 percent.

Data late on Thursday showed India`s gross domestic product grew 6.3 percent in July-September

Indian shares edged lower on Friday as economic growth data came in largely as expected, failing to boost a market weighed down by concerns about the country`s fiscal deficit and global risk factors such as rising crude prices. Data late on Thursday showed India`s gross domestic product grew 6.3 percent in July-September, in line with expectations, as businesses started to overcome troubles after the bumpy launch of a national sales tax. The data failed to lift sentiment after India reported its fiscal deficit reached 96 percent of the budgeted target for the fiscal year ending in March 2018, sending shares sharply lower on Thursday. The Reserve Bank of India (RBI) is also meeting next week at a time of rising concern about a rally in crude prices, which rose following OPEC`s decision to extend production curbs. Nearly all analysts expect the central bank to keep rates on hold. "Since there was a sharp run-up in the markets last week, there is a bit of profit-booking. Even though the GDP number is along expected lines, there is concern building up on the fiscal deficit front," said Hitesh Agarwal, EVP & Head – Retail Research, Religare Securities Ltd. The broader NSE Nifty was down 0.15 percent at 10,211.40 as of 0644 GMT, while the benchmark BSE Sensex was 0.12 percent lower at 33,108.34. Both indexes were down around 1.7 percent for the week, heading for their biggest weekly loss since late September. Indiabulls Housing Finance Ltd led losses on the NSE index, falling as much as 2.1 percent. The stock had gained in the last five sessions. Banking stocks weighed on both indexes ahead of the RBI meeting. State Bank of India fell as much as 0.9 percent while ICICI Bank Ltd lost 0.8 percent. However, the Nifty auto index gained about 1 percent as automakers reported sales for November. A private survey on Friday showed factory activity accelerated last month to the fastest pace since late last year, driven by a surge in new orders. Maruti Suzuki India Ltd rose 1.1 percent after posting a 14 percent rise in November sales. Tata Motors Ltd, expected to report later in the day, rose as much as 1.4 percent.

Sensex slips as fiscal deficit concerns weigh; banks fall

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