Fitch cuts India’s GDP growth forecast to 5.1% in FY21 over COVID-19 concerns

Fitch Ratings cut India’s GDP growth forecast for 2020-21 to 5.1%, saying the supply chain disruptions amid coronavirus outbreak are likely to hit business investment and exports. Earlier, it projected the economy to grow at 5.6% in 2020-21 and 6.5% in 2021-22. “Indian manufacturers are heavily reliant on key Chinese intermediate inputs…especially electronics, machinery and equipment,” it said.

“The outbreak of the virus is hitting sentiment, while local governments have rolled out measures to contain the spread of the virus, such as closing schools, cinemas and theatres. While India’s linkages with China (e.g. trade and tourism) are modest, manufacturers in India are heavily reliant on key Chinese intermediate inputs – especially of electronics and machinery and equipment,” Fitch said.

The WHO has declared coronavirus pandemic. Over 2 lakh people have been infected globally and the disease caused by it. COVID-19 has claimed over 9,000 lives. In India, there are about 195 positive cases and 4 deaths so far from the deadly virus.

“Fragilities in the financial system will further undermine sentiment and domestic spending. The overall financial system remains burdened with weak balance sheets, which will limit any upside to credit and growth despite policymakers’ efforts in recent months to ease stresses,” Fitch added.