Coronavirus Crisis: Fitch Lowers 2020-21 India Growth Forecast To 5.1%

New Delhi: Fitch Ratings on Friday cut India's growth forecast to 5.1 per cent for the financial year 2020-21, saying the coronavirus outbreak is likely to hit business investment and exports. The credit ratings agency had in December projected India's growth at 5.6 per cent in 2020-21 and 6.5 per cent the following year. In its Global Economic Outlook 2020, Fitch said the number of people affected by coronavirus will keep rising in the coming weeks but that the outbreak will remain contained. However, there are downside risks to this scenario.

"Supply-chain disruptions are expected to hit business investment and exports. We see GDP growth to remain broadly steady at 5.1 per cent in the fiscal year 2020-2021 following growth of 5.0 per cent in 2019-2020," Fitch said.

Fitch projected India's growth to be at 6.4 per cent in financial year 2021-22.

"The outbreak of the virus is hitting sentiment, while local governments have rolled out measures to contain the spread of the virus, such as closing schools, cinemas and theatres," Fitch said.

"While India's linkages with China (e.g. trade and tourism) are modest, manufacturers in India are heavily reliant on key Chinese intermediate inputs - especially of electronics and machinery and equipment."

The WHO has declared coronavirus a pandemic. Over two lakh people have been infected by the coronavirus outbreak globally, and over 9,000 have died. In India, there are about 195 positive cases and 4 deaths so far from the deadly virus.

The difficulties facing the Indian economy have been exacerbated by Yes Bank failure, it said.

"Fragilities in the financial system will further undermine sentiment and domestic spending. The overall financial system remains burdened with weak balance sheets, which will limit any upside to credit and growth despite policymakers' efforts in recent months to ease stresses," Fitch added.