FITCH CUTS GDP FORECAST TO 4.6%

NEW DELHI: Fitch Ratings on Friday cut India’s growth rate forecast to 4.6% in fiscal year 2019-20 and affirmed the country’s sovereign credit rating at the lowest investment grade of BBB- with a stable outlook.

However, it said India’s rating balances a still strong mediumterm growth outlook compared with its ‘BBB’ category peers and relative external resilience.

Last month, rating agency Moody’s Investor Service had revised its sovereign rating outlook to negative from stable, while reiterating its credit rating of Baa2, which is the second lowest investment grade score.

Earlier this month, S&P retained India’s rating at the lowest investment grade with a stable outlook.

“Our outlook on India’s GDP (gross domestic product) growth is still solid against that of peers, even though growth has decelerated significantly over the past few quarters, due mainly 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.

The rating agency expects growth to slow to 4.6% in the

FITCH AFFIRMED THE COUNTRY’S SOVEREIGN CREDIT RATING AT THE LOWEST INVESTMENT GRADE OF BBB- WITH A STABLE OUTLOOK

financial year ending March 2020, from 6.8% in FY19, which it maintained is still higher than the ‘BBB’ median of 2.8%.

“We expect growth to gradually recover to 5.6% in FY21 and 6.5% in FY22 with support from easing monetary and fiscal policy, and structural measures that may also support growth over the medium term,” it added.

The Indian economy has decelerated to a six-and-halfyear low of 4.5% in the September quarter, owing to a sharp slowdown in consumption demand.

Fitch said the affirmation of the sovereign rating incorporates its expectation of moderate fiscal slippage relative to the central government’s deficit target of 3.3% of GDP in FY20.

“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. The FY20 deficit target had already been exceeded by end-October due to a weak revenue intake, and a deceleration of nominal quarterly growth suggests further revenue pressure for the rest of the fiscal year,” it added.

Fitch expects the Reserve Bank of India (RBI) to cut its policy rate by another 65 basis points (bps) in 2020, after a cumulative 135bps easing since February 2019.

The rating agency also expects the government to remain focused on reforms during the second term of prime minister Narendra Modi.