Fitch cuts India growth forecast to 2% for FY21

08 Apr '20

2 min read

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India's economic growth is likely to hit a 30-year low of 2 per cent in fiscal 2020-21 as recession grips the global economy following the COVID-19-related lockdown, according to Fitch Ratings, which in its previous report had projected India's gross domestic product (GDP) growth for 2020-21 at 5.1 per cent, lower than 5.6 per cent estimated in December.

Fitch said that the lockdown in China will have a broad-based effect on regional manufacturing supply-chains as the spread of the novel coronavirus has now broadened to include local discretionary spending and exports. The businesses will continue to face supply-chain disruptions even as parts of China return to work, the rating agency was quoted as saying by a newswire.

"Fitch now expects a global recession this year and recently cut our GDP growth forecast for India to 2 per cent for the fiscal year ending March 2021 after lowering it to 5.1 per cent previously, which would make it the slowest growth in India over the past 30 years," it said.

On March 20, Fitch had cut India's growth forecast to 5.1 per cent for 2020-21, saying the coronavirus outbreak is likely to hit business investment and exports.

According to the agency, micro, small and medium enterprises (MSMEs) and the services sectors are likely to be among the most affected due to reduced consumer spending. Non-banking financial companies (NBFCs) will face liquidity crunch due to limited cash buffers, and borrower's inability to repay their loans, it said.

The challenges for NBFCs will intensify as local measures to contain the spread of the coronavirus exert pressure on their operating performance and financial profiles, it said in its latest report.

Fibre2Fashion News Desk (DS)

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