Mumbai: Rating agency Standard & Poor's while welcoming the Budget in general has said the proposals on the fiscal side shows only limited progress and has ruled out any changes in its rating outlook on the country in next 2 years.


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"Budget has made limited progress in fiscal consolidation and it only modestly reduces the vulnerabilities associated with the low per capita income and weak public finances," S&P credit analyst Kyran Curry said in a note issued shortly after the Budget presentation.


"Without marked improvements in the general, government's fiscal out-turns and accompanying declines in net debt, we do not expect to change our rating on India (BBB-/Stable) this year or the next," Curry said.


Budget has retained the fiscal deficit targets fixed at 3.9 percent of GDP for this fiscal and 3.5 percent for FY17-as fixed last fiscal.


This is despite the fact that it expects non-debt revenue for the year is likely to be above the initial budget estimate, largely reflecting indirect tax proposals that will offset revenue losses associated with direct tax proposals.


The projected deficit of 3.5 per cent of GDP reflects its expectation of a small increase in tax revenue that is augmented by higher disinvestment receipts, S&P said.


On the overall Budget, Curry said it highlights the government's commitment to encourage investment in manufacturing and infrastructure, and to bolster rural demand through welfare programs, while containing the fiscal deficit.


"The government's debt burden and subsidy spending continue to significantly constrain its fiscal policy options," said Curry, adding "interest payments and subsidies account for almost 40 per cent of total budgetary expenditure."


If economic growth, interest rates, and food prices differ markedly from budgetary assumptions, the government may have to reduce capital spending again to contain the budget deficit, he said, and warned that this could further weaken the economic growth potential.