"The new budget calls for a modest narrowing of the fiscal deficit at 3.5 per cent in FY21 from 3.8 per cent in FY20, but sustained weaker growth and tax cuts would make gross revenue target difficult to achieve," Moody's said in a statement after the Budget.
The government has limited room to reduce expenditure without further weakening growth, it noted.
"While government remains committed to medium-term fiscal consolidation, any material strengthening in public finances will likely be limited in the near-term, and debt burden will remain sensitive to changes in nominal GDP growth," the agency said.
The Budget highlights the challenges to fiscal consolidation from slower and nominal growth, which may continue for longer than the government forecast, it added.
"This risk is reflected in Moody's negative outlook on the rating," it said.
The Budget also pegs nominal GDP growth for FY21 at 10 per cent -- much below what was projected in the current year at 13.5 per cent and marginally higher than the projected 7.5 per cent growth this year, which is at 48-year low.
The Budget pegs revenue receipts at Rs 22.46 lakh crore, while expenditure at Rs 30.42 lakh crore.
The revised estimated expenditure for FY20 stood at Rs 26.99 lakh crore and receipts at Rs 19.32 lakh crore.
The net market borrowings would be Rs 4.99 lakh crore in FY20 and Rs 5.36 lakh crore in the next fiscal. HV BEN BAL BAL