- Fitch Ratings slashed India’s FY21 growth projection to -10.5%, from -5% estimated earlier, saying the continued spread of the virus and imposition of sporadic shutdowns across the country has disrupted economic activity.
- In the first quarter of current fiscal, India’s gross domestic product (GDP) contracted by a massive 23.9%.
- Fitch said India recorded one of the sharpest GDP contractions in the world in the April-June quarter, but noted that growth should rebound strongly in the July-September period amid re-opening of the economy.
- In its September update of the Global Economic Outlook (GEO), Fitch said, the deepest recessions were in India, the U.K. and Spain.
- Severe fall in activity has also damaged household and corporate incomes and balance sheets, amid limited fiscal support.
- Also a looming deterioration in asset quality in the financial sector will hold back credit provision amid weak bank capital buffers.
- High inflation has added strains to household income and supply-chain disruption and excise duties increases have caused prices to rise.
- It projected inflation to slow amid weak underlying demand, easing supply-chain disruption and a good monsoon.
- GDP growth is likely to be – 9.6% in July-September, – 4.8% in October-December and 4% in January-March quarter this fiscal, as per Fitch projections.
- For the next fiscal, Fitch estimated Indian economy to grow 11%.
- Separately, India Ratings and Research, the India arm of Fitch Ratings, revised India’s GDP growth forecast to – 11.8%, from – 5.3% earlier.
