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Fitch cuts India's GDP growth forecast to 5.1% in FY21 over COVID-19 concerns

Fitch Ratings cut India's GDP growth forecast for 2020-21 to 5.1%, saying the supply-chain disruptions amid coronavirus outbreak are likely to hit business investment and exports. Earlier, it projected the economy to grow at 5.6% in 2020-21 and 6.5% in 2021-22.

20th March 2020 | 12:25 PM (IST)
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Fitch Ratings on Friday cut India's growth forecast to 5.1 percent for FY 2020-21, saying the coronavirus outbreak is likely to hit business investment and exports.

Fitch had in December 2019 projected India's growth at 5.6 percent for 2020-21 and 6.5 percent in the following year.

In its Global Economic Outlook 2020, Fitch said the number of people affected by coronavirus will keep rising in the coming weeks but that the outbreak will remain contained. However, there are downside risks to this scenario.

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

For 2021-22, Fitch projected India's growth to be 6.4 percent.

"The outbreak of the virus is hitting sentiment, while local governments have rolled out measures to contain the spread of the virus, such as closing schools, cinemas, and theatres. While India's linkages with China (e.g. trade and tourism) are modest, manufacturers in India are heavily reliant on key Chinese intermediate inputs – especially of electronics and machinery and equipment," Fitch said.

The WHO has declared coronavirus pandemic. Over 2 lakh people have been infected globally and the disease caused by it — COVID-19 — has claimed over 9,000 lives. In India, there are about 195 positive cases and 4 deaths so far from the deadly virus.

The difficulties facing the Indian economy have been exacerbated by Yes Bank failure, it said.

"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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20th March 2020 | 12:25 PM (IST)
27 views
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