New Delhi:Fitch Solutions on Monday slashed its estimate for India's GDP growth in the fiscal starting April 1 to 4.6 per cent due to weaker private consumption and contraction in investment amid coronavirus outbreak, costing economies around the globe.
The growth estimate for 2020-21 fiscal (April 2020 to March 2021) compares with a 4.9 per cent forecast in the current 2019-20 that ends on Tuesday.
"At Fitch Solutions, we are revising India's FY2020/21 (AprilMarch) real GDP growth forecast to 4.6 per cent, from 5.4 per cent previously, which reflects our view for a slowdown from our FY2019/20's estimate of 4.9 per cent," the rating agency said.
It said despite the Rs 1.7 lakh crore economic package announced last year, private consumption growth would come under strong headwinds over the coming months.
The lower growth estimate, it said, is "due to weaker private consumption and a contraction in investments, although a higher net exports contribution and higher government consumption should help blunt the economic blow from Covid-19".
Risks to the forecast are still on the downside, given that the outbreak in India, as suggested by its relatively low number of reported Covid-19 infections appears to be just beginning.
The number of cases reported "still appear improbably low" especially considering that India is the world's second-most populous nation with a population of over 130 crore.
"A weak healthcare system, with already stretched medical facilities, will also inhibit India's ability to 'flatten the infection curve', which informs our view for a sharp negative impact to the economy over H1FY2020/21 at least," Fitch said. "As such, we expect the outbreak to worsen significantly over the coming months."
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Fitch Solutions joins a chorus of international agencies that have made a similar cut in growth estimates in recent days. Standard and Poor's (S&P) last week cut its estimate for India's GDP growth in 2020-21 to 5.2 per cent from its earlier estimate of 6.5 per cent.
Fitch Ratings slashed its growth forecast from 5.6 per cent to 5.1 per cent for 2020-21.
FY21 GDP growth revised downwards to 3.6%: India Ratings
India Ratings and Research has revised its FY21 gross domestic product (GDP) growth for India down to 3.6% from 5.5%.
The key reasons for this downgrade are the spread of COVID-19 and the resultant nation-wide lockdown imposed till 14 April 2020, crippling most economic and commercial activities.
The revision is based on the assumption of lockdown continuing till end-April 2020 (full or partial) and gradual restoration of economic activities May 2020 onwards.
In view of the lockdown, India Ratings and Research has even revised the FY20 GDP forecast downward to 4.7% (9MFY20: 5.1%) from The National Statistical Office's advance estimate of 5.0%.
The rating agency expects the GDP growth to come in at 3.6% in 4QFY20 and 2.3% in 1QFY21. Average growth is forecast to decelerate to 2.8% in 1HFY21 (1HFY20: 5.3%) and recover to 4.3% in 2HFY21 (2HFY20: 4.2%), due to a) the base effect and b) a gradual recovery and restoration of supply chain, it said.
(Inputs from Agencies)
