American Credit Rating agency Fitch on Tuesday revised its GDP contraction forecast of India’s FY21 GDP from (-) 10.5% to (-) 9.4%.
The agency raised India’s GDP forecast in the current fiscal year to March 2021 after watching a sharp rebound in the second quarter.
The country needs to repair its balance sheets and increase caution about long-term planning due to the severe economic scarring the coronavirus pandemic has inflicted upon the economy, Fitch said in its Global Economic Outlook.
The projections compare a GDP growth of 4.2 per cent in 2019-2020 (April 2019-March 2020) fiscal and 6.7 per cent annual expansion between 2015 and 2019.
"We now expect GDP to contract 9.4 per cent in the fiscal year to end-March 2021 (FY21) (+1.1 percentage point), followed by +11 per cent growth (unchanged) and +6.3 per cent growth (+0.3pp) in the following years," the rating agency said.
In September, Fitch had estimated drastically low rating point of India’s GDP. It projected a 10.5% contraction in the current fiscal year (FY21) compared its previous estimate of 5 per cent.
"The rebound in activity was especially sharp in the manufacturing sector: output reached its pre-pandemic level in 3Q20 (July-September), and the manufacturing PMI hints at further gains," it said adding that manufacturing is buoyed by strong demand for autos and pharmaceutical products, in particular.
The rebound in some of the sectors was low-slung due to the regulations of social distancing and other containment measures.
"The outlook is brighter owing to an expected rollout of various vaccines in 2021. India has pre-ordered 1.6 billion doses including 500 million doses of the Oxford/AstraZeneca vaccine. Distribution should allow a faster-than-expected easing of social-distancing restrictions and boost sentiment," it said.
However, the vaccine roll-out might not reach to the majority of the population given the huge logistical challenge and the vast population of the country, Fitch said.
