Home > politics > policy > Fitch arm says economic downturn to be prolonged

Mumbai: India is unlikely to recover from the current economic downturn until the end of fiscal 2013-14, delaying an improvement in corporate profitability and bank asset quality, said India Ratings and Research Pvt. Ltd, the domestic arm of international credit assessor Fitch Ratings Ltd.

Some 30% of Indian banks’ industrial exposure is rated “negative" or “stable-to-negative" by India Ratings, said Rakesh Valecha, senior director and head-corporates, and Deep Mukherjee, director-corporates, at India Ratings.

“The actual stress level is driven by 22 corporates in BSE 500 with outstanding adjusted debt (including guarantees) of around 1.26 trillion, which may potentially be in distress over the next 12 to 24 months," they wrote in a report.

The report comes ahead of the release on Friday of India’s gross domestic product figures for the year ended 31 March. According to the government’s estimate, India’s economic growth is pegged at 5%, the slowest in a decade.

“Profit and loss starts to improve when revenues start growing which, in turn, is linked to how the economy does domestically or how exports perform. Data we have analysed shows no indication of improvement on these counts. Commodity price benefits have also largely gone through. Hence, we do not expect corporate profits to improve, though they may not get much worse from here," Valecha said.

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