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Fitch lowers India’s FY21 GDP growth forecast to minus 10.5%

09 Sep 2020 Evaluate

Fitch Ratings in its latest report has sharply lowered its forecast for India's gross domestic product (GDP) growth for the current fiscal year (FY21) to (-) 10.5 percent from (-) 5 percent estimated earlier. It pointed out that the continued spread of the virus and the imposition of sporadic shutdowns across the country depress sentiment and disrupts economic activity. It further noted that the severe fall in activity has also damaged household and corporate incomes and balance sheets, amid limited fiscal support.

According to the Fitch projections, GDP growth is likely to be (-) 9.6 percent in July-September, (-) 4.8 percent in October-December and 4 percent in January-March quarter this fiscal. For the next fiscal, Fitch estimated Indian economy to grow 11 percent, while for 2022-21 growth would be 6 percent.

The report further stated that a looming deterioration in asset quality in the financial sector will hold back credit provision amid weak bank capital buffers. Furthermore, it said high inflation has added strains to household income and supply-chain disruption and excise duties increases have caused prices to rise. However, it expects inflation to slow amid weak underlying demand, an easing in supply-chain disruptions and a good monsoon. 

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