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Fitch lowers India's FY22 GDP growth forecast to 8.7%

08 Oct 2021 Evaluate

Fitch Ratings in its latest report has further lowered India's Gross domestic product (GDP) growth forecast for the fiscal year ending March 2022 (FY22) to 8.7 percent from 10 percent projected in June as a result of the severe second virus wave. But, it raised GDP growth projection for FY23 to 10 percent from 8.5 per cent projected in June, saying the impact of the second wave was to delay rather than derail India's economic recovery.

In its APAC Sovereign Credit Overview, Fitch Ratings said India's ‘BBB-/Negative' sovereign rating balances a still-strong medium-term growth outlook and external resilience from solid foreign- reserve buffers, against high public debt, a weak financial sector and some lagging structural factors. It said the ‘Negative’ outlook reflects uncertainty over the debt trajectory following the sharp deterioration in India's public finances due to the pandemic shock.

Listing negative sensitivities, the report said failure to reduce sufficiently the fiscal deficit to a level consistent with putting the general government debt/GDP ratio on a downward trajectory and a structurally weaker real GDP growth outlook due to continued financial sector weakness or reform implementation that is lacking. On the positive side, implementation of a credible medium-term fiscal strategy to bring general government debt down after the pandemic towards the levels of 'BBB' category peers.

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