"Even if the budgetary consolidation continues, India's fiscal metrics will remain weaker than rating peers in the near term, because of the relatively high level of India's state and central government deficits and debt," Moody's said in a report.

"But at around 63.8 percent of GDP, India's government debt ratio remains high compared to the median of 49.5 percent for Baa3-rated peers. Without continued fiscal consolidation, India's government finances will continue to compare poorly to peers," it added.

The fiscal deficit for 2014-15 touched 4.1 percent of the gross domestic product, while the government has targeted at containing it at 3.9 percent and 3.5 percent of GDP for this fiscal and the next, respectively.

''The budget will reveal whether and how the government intends to maintain the trend of modest fiscal deficit reduction of the past few years," the report said.

Moody's said the fiscal weakness was partly from structural factors. Lower per-capita incomes of around USD 1,700 limit the government's tax base and raise pressure for subsidies and development spending.

Noting that the current growth environment complicates fiscal consolidation, Moody's said India's impressive growth rate that outperformed similarly rated sovereigns, was  accompanied last year by subdued rural demand owing to poor monsoons, and weak corporate profitability with pricing power staying low.

On the basis of trends in revenues and expenditures over the last five years, Moody's said India's fiscal consolidation process remains vulnerable to economic shocks, such as a fall in corporate profits or consumption growth, or an increase in subsidy costs.

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