Fitch Ratings on Friday cut its growth forecast for India to 4.6 per cent for the 2019-20 fiscal from the previous estimation of 5.6 per cent after factoring in significant deceleration in past few quarters due to credit squeeze and deterioration in business and consumer confidence.
It reaffirmed India’s rating at ‘BBB-’ with a Stable Outlook saying the rating balances a still strong medium-term growth outlook compared with similar category peers and relative external resilience stemming from solid foreign-reserve buffers against high public debt, a weak financial sector and some lagging structural factors, including governance indicators and GDP per capita.
The Fitch’s FY2019-20 growth forecast is lower than 4.9 per cent projection by Moody’s and 5.1 per cent by Asian Development Bank. The Reserve Bank of India (RBI) has also revised GDP growth forecast to 5 per cent for 2019-20 from 6.1 per cent projected in October.
“Our outlook on India’s GDP growth is still solid against that of peers, even though growth has decelerated significantly over the past few quarters, mainly due to domestic factors, in particular, a squeeze in credit availability from non-banking financial companies (NBFC) and deterioration in business and consumer confidence,” Fitch said in a statement on Friday.
“We expect growth to gradually recover to 5.6 per cent in FY2020-21 and 6.5 per cent in FY2021-22 with support from easing monetary and fiscal policy and structural measures that may also support growth over the medium term.”
It said its rating for India incorporates the expectation of moderate slippage in the fiscal deficit target of 3.3 per cent of GDP in FY2019-20.
“The government is again facing a trade-off between stimulating the economy and reducing the deficit in the medium term. Some fiscal slippage has occurred in recent years against government targets, even during periods of sustained stronger growth.