New Delhi: Fitch Ratings has cut the estimate of India’s economic growth to 8.7 percent for current fiscal but increases the projected growth of GDP for FY23 to 10 percent, by saying the second Covid-19 wave was postponed rather than thwarting economic recovery.
In the overview of its APAC SOVEREIGN credit, Fitch Ratings said the sovereign ratings ‘BBB-Negative’ India “balanced the outlook for medium-term growth that was still strong and external resilience from solid foreign reserves buffers, against weak public debt, weak financial sector and several factors Structural lagged “.
Outlook ‘negative’, he said, reflecting uncertainty over the debt trajectory after a sharp decline in Indian public finance due to pandemic shocks.
Fitch said it had further lowered the estimated Indian GDP for the fiscal year which ended in March 2022 (FY22) to 8.7 percent from 10 percent in June as a result of severe waves of the severe virus.
It was in June cutting growth estimates from 12.8 percent.
Projections for 2021-22 fiscal compared to 7.3 percent contractions are recorded in the last financial year and 4 percent growth in 2019-20.
“However, in our view, the impact of the second wave is to delay rather than thwarting the economic recovery of India, reflected in the upward revision of our FY23 (April 2022 – March 2023) Estimated GDP to 10 percent from 8.5 percent in June,” said it said .
High frequency indicators show a strong rebound in the second second quarter of fiscal (April 2021-March 2022), because business activity returns to the pre-pandemic level.
Fitch, however, see a wider fiscal deficit.
“We estimate 7.2 percent of GDP (excluding disinvestment) the central government deficit in TA 22,” he said.
The government on June 28 this year announced a fiscal package worth around 2.7 percent of GDP.
Many of these consist of loan guarantees, with only 0.6 percent of GDP in higher budget expenditures.
“However, floating income performance is mostly offsetting higher expenses and must help contain a fiscal deficit,” he said.
“The wider fiscal deficit and government plans are only for gradual consolidation that put a greater responsibility for the ability of India to return to high-term GDP growth to reduce the debt ratio.” Inflation has floated around the upper end of the Bank of India’s reserve (RBI) targeting a 2-6 percent inflation band over the past few months, because commodity pressure raises prices.
The RBI has maintained its repo level at 4 percent since March 2020, because it focuses on supporting the economy and considers temporary pressure.
“We expect inflation to moderate, which should allow the RBI to keep interest rates until the next fiscal year,” Fitch said.
Negative sensitivity listings, he said failure to reduce a fiscal deficit with a consistent level by placing the general government debt / GDP ratio on the bottom trajectory and the prospect of significant real GDP growth because of the financial sector or lack of reform implementation.
On the positive side, the implementation of the credible medium-term fiscal strategy to bring public government debt down after the pandemic of the level of ‘BBB’ categories of colleagues.
Also, sustainable investment and higher growth rates in the medium term without the creation of macroeconomic imbalances, such as the implementation of successful structural reforms and healthier financial sectors.
RBI also in July cut the estimated growth of India to 9.5 percent for this fiscal, from 10.5 percent estimated previously.
While the S & P global rating lowered its growth estimates to 9.5 percent, the other rating agency based in US Moody’s has projected a growth of 9.3 percent at the end of the year at the end of March 2022.
For the calendar year 2021, Moody’s has cut its growth estimate to 9, 6.
percent.
In June, the World Bank cut the estimated GDP growth for FY22 to 8.3 percent, from 10.1 percent estimated in April, by saying economic recovery was hampered by the second wave of destructive Koronavirus infection.
The ICRA domestic rating agency last month has projected economic growth at 9 percent for this financial year, while the British Broker Barclays company has projected India’s growth of 9.2 percent.