Fitch cuts India growth forecast to 5.1% for 2020-21

23 Mar '20

2 min read

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Fitch Ratings has cut India''s growth forecast to 5.1 per cent for fiscal 2020-21, saying the COVID-19 pandemic is likely to hit business investment and exports. It had projected India's growth at 5.6 per cent for 2020-21 last December. In its Global Economic Outlook, Fitch said the number of infected will rise but the outbreak will remain contained.

However, there are downside risks to this scenario, the rating agency said.

"Supply-chain disruptions are expected to hit business investment and exports. We see GDP growth to remain broadly steady at 5.1 per cent in the fiscal year 2020-2021 following growth of 5.0 per cent in 2019-2020," Fitch said.

While India’s linkages with China are modest, manufacturers in India are heavily reliant on key Chinese intermediate inputs, especially of electronics and machinery and equipment, Fitch said.

The difficulties facing the Indian economy have been exacerbated by Yes Bank failure, it was quoted as saying by a news agency.

"Fragilities in the financial system will further undermine sentiment and domestic spending. The overall financial system remains burdened with weak balance sheets, which will limit any upside to credit and growth despite policymakers'' efforts in recent months to ease stresses,” Fitch added.

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