Fitch Ratings has lowered India's GDP forecast to 8.7 per cent for the current financial year from the earlier projection of 10 per cent in June, mainly due to the second wave of the Coronavirus pandemic.
At the same time though, the agency has raised the economic growth forecast for the forthcoming fiscal i.e. 2022-23 to 10 per cent, noting that the second wave of the pandemic in India only delayed economic recovery and did not derail it.
In fact, the 10 per cent growth forecast by Fitch was lower than its earlier prediction of 12.8 per cent for the current fiscal.
Fitch, in its APAC sovereign credit overview, noted that India's “BBB-Negative” outlook reflects the uncertainty over the debt trajectory due to the sharp decline in the country's public finances, hit mainly by the pandemic.
The agency said that business activities returned back to the pre-pandemic levels during the second quarter of the current financial year.
At the same time though, it has suggested a widening fiscal deficit, forecasting it at 7.2 per cent of the GDP during the current fiscal.
On the inflation scenario, Fitch said that it would moderate and this will allow the Reserve Bank of India (RBI) to maintain the status quo on key rates at least till the next financial year.