Moody's Investors Service, while silent on the sovereign rating on the higher-than-expected fiscal deficit numbers, expressed doubts over attaining the higher revenue targets and divestment realization as assumed in the Budget.

The Union Budget 2021-22 has pegged a fiscal deficit of 9.5 percent for the current financial year as against the consensus 7 percent, and 6.8 percent for 2021-22 with a market borrowing of around Rs 12 lakh crore. It also assumes Rs 1.75 lakh crore to be scooped up from divestment. The Fiscal Responsibility and Budget Management Act will also be amended to achieve a fiscal deficit of 4.5 percent of GDP by 2025-26 only.

"The fiscal deficit target of 6.8 percent for 2021-22 tries to strike a balance between supporting growth and a modest deficit reduction, but improvements in tax compliance and monetization targets may be difficult to achieve," the rating agency said in a note.

Overall, the Budget highlights the challenges to stabilizing the debt trajectory following the pandemic-induced shocks. Although a decline in new pandemic cases and normalizing activity are driving the rebound, the lasting effects of the pandemic on the economy will continue to pose downside risks to sustained growth in the medium-term, they said.

On the plans to privatize two state-owned banks and a general insurance company and also to take LIC public with an IPO, the note said divesting government stakes in banks is credit-negative for the banks involved, as it will reduce the ongoing government support for them.

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