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Rating agency Moody's said has the Union Budget lacks any tangible measures to increase revenue generation even though the capital expenditure plans have gone up significantly and the fiscal deficit estimate suggests that the government is relying too much on strong growth to help drive fiscal consolidation. The agency stated the budget underscores government's previous emphasis on capex to sustain near-term recovery from the pandemic, while simultaneously paving the way for longer-term restructuring of the economy.

However, Christian de Guzman, a senior vice-president, sovereign risk group, Moody's Investors Service, said the various spending initiatives are not offset by any significant announcements related to further increase revenue generation; rather, the announced revenue-related measures are aimed at other objectives such as fostering startup innovation, ensuring more equitable treatment for cooperatives and state employees, and promoting tax compliance through simplification.

On the fiscal consolidation front, he said the target for the central deficit to narrow to 6.4 per cent in FY23 from a 6.9 per cent in FY22 suggests government is relying on strong growth to help drive fiscal consolidation in light of the large bump in capex, which is up by 35 per cent for the next fiscal and this poses some uncertainty given the prevalence of the pandemic-related risks.