He highlighted that by not addressing these issues the risk on economy would rise further. “The true extent of fiscal risk is higher than nominally apparent,” he added.

Although the FM, on Sunday, said buoyancy in revenue collections could meet the additional burden to pay the salary hike of Central government employees after the Sixth Pay Commission submits its report by April 4, Moody’s said the continued revenue buoyancy could underpin a level of fiscal performance consistent with incremental improvements in debt ratios.

“The projected growth in the central government’s budget expenditure looks extremely conservative, and this could very well be designed to make headroom for meeting additional expenses related to the Sixth Pay Commission’s public sector wage recommendations,” Mitra added.