INSUBCONTINENT EXCLUSIVE:
Fitch said its forecasts are subject to considerable risks due to rising COVID-19 casesCredit ratings agency Fitch said on Thursday it had
The coronavirus pandemic has significantly weakened India's growth outlook for this year and exposed the challenges associated with a high
public-debt burden, Fitch said
The change in its outlook on India's long-term foreign-currency issuer default rating comes days after another rating agency, S-P, also
contract 5 per cent in the current fiscal year from the strict lockdown measures imposed since March 25 2020
However, the ratings agency reiterated that gross domestic product (GDP) in the country will grow 9.5 per cent in the next fiscal year
continued acceleration in the number of new COVID-19 cases as the lockdown is "eased gradually"."The humanitarian and health needs have been
pressing, but the government has shown expenditure restraint so far, due to the already high public-debt burden going into the crisis, with
additional relief spending representing only about 1 per cent of GDP by our estimates
Most elements of an announced package totalling 10 per cent of GDP are non-fiscal in nature," Fitch said.Last month, the government provided
details of fiscal and monetary support worth Rs 21 lakh crore - equivalent to 10 per cent of GDP - to help the country battle the fallout
from the coronavirus pandemic
However, economists say that much of this has already been budgeted for by the government and very little includes new spending."Some
further fiscal spending of up to 1 percentage point of GDP may still be announced in the next few months, which was indicated by a recent
announcement of additional borrowing for FY21 of 2 per cent of GDP, although we do not expect a steep rise in spending," Fitch said.The
credit ratings major said it expects the government debt to jump to 84.5 per cent of GDP in the current fiscal year, from an estimated 71.0
per cent of GDP in 2019-20
This is significantly higher than the median of 42.2 per cent of GDP for the "BBB" category, which represents good credit quality, in 2019
importance from a rating perspective, but is subject to great uncertainty and will depend on the level of GDP growth and the government's
policy intentions, Fitch said.The country's medium-term GDP growth outlook may be negatively affected by renewed asset-quality challenges
in banks and liquidity issues in non-banking financial companies (NBFCs), according to Fitch.
