Reforms can support India’s medium-term growth: Fitch

  • The ratings agency expects the Centre to announce more reforms measures over the next few years, and hopes state governments will follow suit
  • It said the two landmark reforms, the IBC and good and GST, rolled out during the Union government’s first term faced setbacks due to the pandemic

Shreya Nandi
Updated20 Nov 2020, 11:10 PM IST
The ratings agency also pointed out that two landmark reforms—Insolvency and Bankruptcy Code and Good and Services Tax—from the government’s previous term faced setbacks recently due to the pandemic.
The ratings agency also pointed out that two landmark reforms—Insolvency and Bankruptcy Code and Good and Services Tax—from the government’s previous term faced setbacks recently due to the pandemic.(REUTERS)

Fitch Ratings on Friday said the government’s economic reforms agenda in response to the coronavirus pandemic has the potential to raise India’s medium-term growth rate.

The ratings agency expects the Centre to announce more reforms measures over the next few years, and hopes state governments will follow suit.

“However, there are also downside pressures to growth and it will take time to assess whether the reforms are implemented effectively,” Fitch added.

“Raising medium-term growth rates under these circumstances will require reforms to support investment and boost productivity. We noted the GDP (gross domestic product) growth outlook as a key rating sensitivity when we revised the outlook on India’s ‘BBB-’ rating to Negative from stable in June.”

Fitch said several initiatives, such as the agricultural reforms to offer farmers more flexibility to sell their produce, labour reforms to improve access to social security, passed by Parliament amid the covid crisis may lift prospects of medium-term growth. It said the two landmark reforms, the Insolvency and Bankruptcy Code (IBC) and good and services tax (GST), rolled out during the Union government’s first term faced setbacks due to the pandemic.

“The IBC has been suspended temporarily in line with forbearance regulations for banks, while a decline in inflows from GST will make it more challenging to divide these revenues among the Centre and the states,” the ratings agency said.


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First Published:20 Nov 2020, 11:10 PM IST
HomeNewsIndiaReforms can support India’s medium-term growth: Fitch

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