India forecast to unleash more stimulus measures

Fitch says lowering of rating factored in budget pressure

India is very likely to come out with another round of fiscal stimulus package, worth about 1 per cent of GDP in the coming months, Fitch Ratings said yesterday.

Fitch, which last week lowered India’s sovereign rating outlook to negative from stable, said it has factored in the outgo for additional fiscal stimulus while deciding on the rating action.

The director for sovereign ratings at Fitch, Thomas Rookmaaker, said Covid-19 is still in India and it is “very likely” that the government will have to spend a bit more on fiscal measures to support the economy.

“In our forecast we have factored in a larger stimulus package, not just 1 per cent of GDP of fiscal measures that have been announced so far. You may recall that Prime Minister Narendra Modi announced 10 per cent of GDP as measures, but 9 percentage points were non-fiscal in nature. There was also an announcement of bond issuance, borrowing requirement of government and that was 2 percentage points of GDP.

“That could give an indication that another 1 percentage points could come in the months ahead to provide relief for those who need it,” Rookmaaker said while addressing a Fitch Ratings webinar.

The Rs21 trillion economic package announced last month, includes government measures and RBI liquidity.

The central government has also raised the estimated gross market borrowing to Rs12 trillion from Rs7.8 trillion as per the Budget Estimates for 2020-21.