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Moody warns on India's fiscal position- suggests caution

India's fiscal position is weak. In simple words, it has been spending more than it receives by way of taxes and other collections. To fund this spending, the government has resorted to heavy borrowing by way of issuing bonds and populist measures like subsidies on fuel, amongst others. Despite a new government that was said to be bringing in reforms very aggressively, such populist measures are not proving that easy to do away with. If the government is to give further stimulus to the economy, it will have to borrow more, consequently not only further deteriorating its fiscal position, but also bringing in the risk of further upward pressure on interest rates which will in turn be bad for the general investment scenario in the economy.

Highlighting this very predicament, credit rating agency Moody's has warned that India's fiscal position suggests caution, as the government is not in a position to offer sustained support to a weak economy. Further, most developed countries around the world are still very much in recession. Indeed, things may not be as good as the Indian stock markets have made it out to be.

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