American credit rating agency, Fitch Ratings, on Friday, March 20, cut India’s growth forecast to 5.1 per cent for FY 2020-21 as it predicts the COVID-19 outbreak may hit business investment and exports. Fitch had projected India’s growth at 5.6 per cent for 2020-21 and 6.5 per cent in the next year.

Fitch, in Global Economic Outlook 2020, claimed that the number of people affected by the virus will be on the rise in the following weeks. It also said that the outbreak will remain contained. The scenario, however, faces downside risks.

‘Supply-chain disruptions are expected to hit business investment and exports. We see GDP growth to remain broadly steady at 5.1 per cent in the fiscal year 2020-2021 following growth of 5.0 per cent in 2019-2020,’ The Economic Times quoted Fitch as saying. Fitch projected India’s growth to be 6.4 per cent for 2021-22.

‘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 Indian economy has been greatly affected by the Yes Bank failure, among other things.

‘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 said.

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