Food bill credit negative for India, says Moody’s

NEW DELHI (TIP): The food security bill approved by Lok Sabha will heighten India’s macroeconomic problems and hurt government finances, global rating agency Moody’s Investors Service cautioned on August 29. It said the Food Security Bill is credit negative for the Indian government. The agency has a Baa3 rating on India with a stable outlook. This is a notch above the junk grade status. The Lok Sabha on Monday approved the food security bill, which seeks to provide subsidized foodgrains to 75% of the rural population and 50% of the country’s urban population.

While the objective behind the bill has been lauded, it has faced strong criticism for the possible impact on government finances, the farm sector and the broader economy. Experts have slammed the timing of the bill, which comes against the backdrop of a slowing economy and a volatile currency. “The measure is credit negative for the Indian government (Baa3 stable) because it will raise spending on food subsidies to about 1.2% of GDP per year from an estimated 0.8% currently, exacerbating the government’s weak finances,” Moody’s said

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