Indian GDP to contract 10.5 per cent: Fitch Ratings

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 per cent from -5 per cent estimated earlier.

Amid other things, the American credit rating agency discussed the continued spread of the virus and the imposition of sporadic shutdowns across the country, which depressed sentiment as well as disrupted the economic activity. It further noted that the severe fall in the activity has also damaged household, corporate incomes, and balance sheets, amid limited fiscal support.

According to Fitch projections, GDP growth is likely to be at -9.6 per cent in July-September, -4.8 per cent in October to December, and 4 per cent in January to March quarter this fiscal. For the next fiscal, Fitch estimated the Indian economy to grow by 11 per cent while for 2022-21; it believes that the growth would be 6 per cent.

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