Fitch lowers India rating from ‘stable’ to ‘negative’

With the coronavirus pandemic extracting a heavy toll on the economy, ratings agency Fitch on Thursday cut its outlook on India’s sovereign rating to “negative” from “stable” and affirmed the rating at “BBB-minus”, which is the lowest investment grade. At the same time, it also forecast a five per cent contraction in growth for the current fiscal year.

This move comes after Moody’s downgraded India earlier this month to a notch above. Global brokerage firm Nomura maintained it, but said the next rating action may occur by end-2020 or early 2021.

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With the coronavirus pandemic extracting a heavy toll on the economy, rating agency Fitch on Thursday cut its outlook on India’s sovereign rating to ‘negative’ from ‘stable’ and affirmed the rating at ‘BBB-‘, which is the lowest investment grade. At the same time, the rating agency also forecast a 5 per cent contraction in growth for the current fiscal year.

The agency’s move comes after Moody’s downgraded India earlier this month to a notch above junk. In line with other global agencies, Fitch cut its outlook to ‘negative’, while global brokerage firm Nomura maintained its rating, saying that it sees a potential for the next rating action to occur as early as the end of 2020 or the start of 2021.

According to the study conducted by Fitch Ratings, further negative rating action could be triggered by a structurally weaker growth outlook from financial stability concerns or a stalling of reform implementation. “The coronavirus pandemic has significantly weakened India’s growth outlook for this year and exposed the challenges associated with a high publicdebt burden,” it said.

“This could also be triggered by an absence of credible fiscal consolidation,” It said.