Food Security Bill: Credit Negative Says Moody's

Standard & Poors earlier had said that there are rough patches ahead on the road of economic growth for India. Now, Moody's too has joined the league. In a statement made today, the agency has pointed out that India's plan to provide cheap grains to the poor is credit negative. This will in turn worsen the government's already weak finances.

A news wire quoted Moody's which says that "the measure is credit negative for the Indian government because it will raise government spending on food subsidies to about 1.2 percent of GDP per year from an estimated 0.8 percent currently, exacerbating the government's weak finances," Moody's said in a statement on August 29.

At present Moody's currently has a "Baa3" sovereign rating on India, or its lowest investment-grade rating, with a "stable" outlook. The Lok Sabha approved a plan worth nearly Rs 1.30 rupees on Monday to provide cheap grain to the poor. It can be said that the steps taken by the ruling government as a populist step ahead of the general elections next year.