India will spring back @9.5% post-coronavirus: Fitch

But to get the momentum of recovery, rating agencies say the government will need to focus on reforms in the financial sector and the labour market

True, the situation in the country is difficult, but it is expected to improve soon. Two of the world’s largest agencies have made this prediction about the Indian economy. Both have said that the GDP growth rate will start accelerating this year, with the impact of coronavirus decreasing later in 2020. In the next two years — that is by 2022 — India’s growth rate will be between 8.5% to 9.5%. The largest rating agencies internationally, Fitch and S&P, had drawn some flak in India for their predictions in the last week where the economy of the country they had said would shrink up to 5%.

There is a difference of only 1% between Fitch and S&P. Fitch estimates that India’s growth rate will be 9.5% in the next two years while S&P says it will be 8.5%.

But rating agencies say that to get the momentum of recovery, India will need to focus on reforms in the financial sector and the labour market.

‘India must reform’

Fitch Ratings forecast an improvement in the Indian economy in FY2022. The agency said on 10 June that the Indian economy would rebound sharply after the fall caused by the coronavirus epidemic in the current financial year. Its growth rate in the next financial year will be 9.5%.

However, the financial sector will have to be reformed for a faster growth rate, the agency said. It has projected a 5% reduction in GDP in the current financial year, as did S&P.

GDP growth will be 8.5%: S&P

Standard & Poor’s (S&P) has said that despite a big fall in FY2021, there are signs of a strong recovery in India. India’s GDP growth could be close to 8.5% in FY2022.

The agency has added a caveat that India needed to improve its weak financial sector and labour market. If this is not done, the recovery may be affected. The agency has projected a 5% reduction in GDP in the current financial year.

India still at sovereign credit rating of BBB-

S&P has not changed the sovereign credit ratings of India: BBB-. The agency has confirmed long-term ratings on India’s foreign and local currency as BBB- and short as A-3.

S&P Global Ratings has stated that India’s outlook is stable on long-term ratings. The rating agency said in a statement on 10 June that the stable scenario suggested that the economy of India would improve after it witnesses a curb in the spread of COVID-19. India will then retain its strong position, it said.

Fiscal deficit estimated to be 11%

S&P said that the recent measures taken by the Narendra Modi government had paved the way for good policy. But lower revenue would, it said, continue to weaken India’s fiscal situation.

The agency said that due to the COVID epidemic — pandemic in many other parts of the world — it would be difficult for the government to take strict steps to raise revenue. In such a situation, India’s fiscal deficit could move up to 11% of GDP in FY2021.

GDP growth 4.2% this year

The GDP growth of India during the January-March quarter has been 3.1%. However, the growth during the whole year was 4.2%.

The Gross Value Added (GVA) has been 3.9%.

According to data from the Central Statistical Department, the growth rate of GDP in the October-December quarter was 4.7% whereas during the entire year of 2019, this growth rate was 6.1%.

Sirf News Network

By Sirf News Network