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Indian economy to grow at 9.5% post economic crisis: Fitch

12
Jun '20
Pic: Shutterstock
Pic: Shutterstock
India is projected to see a 9.5 per cent gross domestic product (GDP) growth after the end of the global COVID-19-induced economic crisis, provided there are no further bumps on the road, according to Fitch Ratings, which recently forecast a 5 per cent contraction in the GDP in the current fiscal. The pandemic has drastically weakened India's growth outlook, it said.

"After the global crisis, India's GDP growth is likely to return to higher levels than 'BBB' category peers, provided it avoids further deterioration in financial sector health as a result of the pandemic," Fitch said in its Asia-Pacific Sovereign Credit Overview.

General government debt already stood at 70 per cent of GDP in 2019-20, well above the 'BBB' rating median of 42 per cent. India's public debt:GDP ratio is expected to rise to 84 per cent of GDP in 2020-21, up from a forecast of 71 per cent when Fitch Ratings affirmed the 'BBB-' rating in December 2019.

"This is based on our expectation of slower economic growth in FY21 and wider fiscal deficits, assuming that the government's fiscal response remains restrained," it said.

"The credit profile is strengthened by relative external resilience stemming from solid foreign-reserve buffers, but weakened by some lagging structural factors, including governance indicators and GDP per capita," it said.

Fitch Ratings said there was greater confidence in a sustained reduction in general government debt over the medium term to a level closer to the 'BBB' peer median. Also, there is a possibility of higher sustained investment and growth rates without the creation of macroeconomic imbalances, such as from successful structural reform implementation.

Among the negatives was a material increase in the fiscal deficit, causing the gross general government debt:GDP ratio to be placed on a sustained upward trajectory.

The other negative was loose macroeconomic policy settings that cause a return of persistently high inflation and widening current-account deficits, which would increase the risk of external funding stress, it said.

Fibre2Fashion News Desk (DS)


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