Fitch cuts India’s GDP outlook to 5.1% for 2020-21

nNEW DELHI: Fitch Ratings on Friday slashed its growth forecast for India from 5.6% to 5.1% for 2020-21, as Covid-19 hit Indian manufacturers after supply chain disruptions in China.

Fitch joins a chorus of international agencies that have made similar observations in recent days. Standard and Poor’s (S&P) on Wednesday had slashed its 2020 growth projection for India from 5.7% to 5.2% as it feared that the Asia Pacific region may slide into a recession, with countries enforcing lock-downs to contain the pandemic. Moody’s and the Organisation for Economic Cooperation and Development (OECD) have cut their 2020 growth projections for India to 5.3% and 5.1%, respectively.

Fitch said although the number of confirmed Covid-19 cases in India was still low in comparison to the size of its population, it was picking up. This scenario assumes the number of people affected will keep rising in the coming weeks, but that the outbreak will remain contained.

The rating agency said the downside risks to this scenario is that consumer and business sentiment will be hurt, as local governments roll out measures to contain the spread of the virus. “While India’s linkages with China are modest, manufacturers in India are heavily reliant on Chinese intermediate inputs— especially of electronics (60%) and machinery and equipment (47%). Supply-chain disruptions are expected to hit business investment and exports.”

Fitch said difficulties facing the economy have been exacerbated by YES Bank’s collapse. “Frailties in the financial system will further undermine sentiment and domestic spending.”