Macro Economy

Fitch sees the economy growing 9.5% next fiscal

Our Bureau Mumbai | Updated on June 10, 2020

The external resilience places India in a better position, says Fitch   -  REUTERS

Expressing confidence in India’s ability to recoup from the current economic uncertainty, Fitch Ratings expects the economy to clock near double-digit growth next fiscal year. It has projected GDP growth of 9.5 per cent in 2021-22 after a contraction of 5 per cent this fiscal year.

“The pandemic has drastically weakened India’s growth outlook and laid bare the challenges caused by a high public-debt burden. After the global crisis, India’s GDP growth is likely to return to higher levels than 'BBB' category peers, provided it avoids further deterioration in financial sector health as a result of the pandemic,” Fitch Ratings said in the its APAC Sovereign Credit Overview released on Wednesday.

It noted that the country’s credit profile is strengthened by relative external resilience stemming from solid foreign-reserve buffers, but weakened by some lagging structural factors, including governance indicators and GDP per capita.


Fitch had in December last year affirmed India’s sovereign ratings. It said that positives for the economy include greater confidence in reduction in general government debt over the medium-term closer to the ‘BBB’ peer median as well as higher investment and growth rates without the creation of macroeconomic imbalances.

The agency listed a significant rise in the fiscal deficit, which could lead to higher gross general government debt to GDP ratio, and loose macroeconomic policy settings that cause a return of persistently high inflation and widening current-account deficits as negatives for the economy.

“General government debt already stood at 70 per cent of GDP in 2019-20, according to our estimate, well above the ‘BBB’ median of 42 per cent,” Fitch said, adding that it expects India’s ratio of public debt to GDP to rise to 84 per cent of GDP in the current fiscal.

“This is based on our expectation of slower economic growth in 2020-21 and wider fiscal deficits, assuming that the government’s fiscal response remains restrained,” it said. The stimulus measures by the government amount to 10 per cent of GDP, of which the fiscal component is about 1 per cent of GDP. This is significantly less than many of India’s peers, Fitch further said.

Published on June 10, 2020

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