Fitch expects Indian economy to rebound by 9.5% in FY22

18 Jun '20

2 min read

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Fitch today revised its outlook on India to ‘negative’ from ‘stable’, and affirmed the rating at ‘BBB-‘, the lowest investment grade. The COVID-19 pandemic has significantly weakened the growth outlook and exposed the challenges associated with a high public-debt burden, it said, adding that India’s gross domestic product (GDP) will grow by 9.5 per cent in the next fiscal, with the rebound mainly driven by a low-base effect.

The credit rating agency said it expects economic activity in the country to contract by 5 per cent in this fiscal from the strict lockdown measures imposed since March 25. However, its forecasts are subject to considerable risks due to the continued acceleration in the number of new COVID-19 cases as the lockdown is eased gradually.

"The humanitarian and health needs have been pressing, but the government has shown expenditure restraint so far, due to the already high public-debt burden going into the crisis, with additional relief spending representing only about 1 per cent of GDP by our estimates. Most elements of an announced package totalling 10 per cent of GDP are non-fiscal in nature," Fitch said.

Fiscal metrics have deteriorated significantly, notwithstanding the government's expenditure restraint, due to the impact of the severe growth slowdown on revenue, the fiscal deficit and public-sector debt ratios. Fitch expects general government debt to jump to 84.5 per cent of GDP in FY21 from an estimated 71 per cent of GDP in fiscal 2019-20.

Fibre2Fashion News Desk (DS)

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