Fitch cuts GDP growth to 8.7%, cites COVID impact

Rating outlook stays ‘negative’ on debt

Fitch Ratings slashed its FY22 growth forecast for India from 10% to 8.7%, citing the severe second COVID-19 wave, which it said would ‘delay rather than derail’ economic recovery. Accordingly, it raised the growth forecast for FY23 to 10% from 8.5% estimated earlier.

The ratings agency has also retained the ‘negative’ outlook on India’s sovereign BBB- rating, citing greater uncertainty over the country’s debt levels due to a sharp deterioration in public finances triggered by the pandemic shock.

“India’s 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,” Fitch said in its sovereign credit overview for the Asia-Pacific. The agency said higher public debt trajectories were the reason it had retained the ‘negative’ outlook for India as well as Japan and Australia.