Excise cut on fuel credit negative, fiscal deficit may go up 0.1%: Moody's

The excise duty cut on petrol and diesel is credit negative for India as it will reduce government revenue and increase fiscal deficit by 0.1 per cent to 3.4 per cent of GDP in the year ending March 2019, Moody's Investors Service said Tuesday.

Also, the earning of public sector oil marketing companies (OMCs) would be "negatively affected" as they also absorbed Rs 1 per litre cut in their pricing, Moody's said.

The government on Friday cut excise duty on petrol and diesel by Rs 1.5 a litre, sacrificing Rs 105 billion revenue in the current financial year.

"Overall, excise duty cuts are credit negative because they will reduce government revenue collection and increase India's fiscal deficit," Moody's said in a statement.

The US-based rating agency said these measures create downside risks to the central government's fiscal deficit target of 3.3 per cent of GDP for financial year 2018.