Indian economy would score a distinctive growth rate as high as 9.5% next year if a further decline in its financial sector is averted, Fitch’s Rating forecasted. As for the current fiscal year, the contraction is forecasted around 5% of the GDP. Recent pandemic has impaired India growth and worsened by the burden of high public debt. India’s GDP is likely to return on a higher-than-BBB level after the global crisis, avoiding a further decline in the financial sector in the cause of the pandemic.
India Prime Minister Narendra Modi has imposed a world’s largest lockdown in India, with a massive 1.3 billion resident on the strict measure, thus bringing the country’s economic activity to an almost standstill. Until now, the lockdown days have been counting up to day 83, with repeated extension since day 21 but some restriction has been eased in some areas from May 4 as a way to rekindle the economy. On the other hand, new infections are still continued to rise.
The pandemic also forces the country’s central bank, the Reserve Bank of India (RBI) to ease monetary policy to boost the economy, as providing liquidity and cutting policy rates through long term repo operations. Stimulus measures have also been announced by the government with an amount of 10% GDP, whereas the fiscal component of around 1% GDP is significantly less than many of surrounding countries’.
The government debt was 70% of GDP in 2019-2020, higher above the ‘BBB’ median rating of 42%, and is predicted to increase to 84% in 2020-2021. This is 13% higher than when Fitch ratings affirmed the BBB- rating in December 2019, with the earlier prediction of 71%. Fitch’s spokesperson said that the ratings are based on the expectation of slower economic growth in 2021 fiscal year and wider fiscal deficits.
Standard & Poor (S&P) global rating agency lowering rating on India at the lowest investment grade with a stable outlook. This rating released after Moody’s Investor Service down India’s rating to the lowest investment grade.
