Fitch Ratings has revised the outlook on India's Long-Term Foreign-Currency Issuer Default Rating (IDR) to negative from stable and affirmed the rating at 'BBB-'.
The coronavirus pandemic has significantly weakened India's growth outlook for this year and exposed the challenges associated with a high public-debt burden, Fitch said.
Fitch expects India's economic activity to contract by 5% in the fiscal year ending March 2021 (FY21) from the strict lockdown measures imposed since 25 March 2020, before rebounding by 9.5% in FY22, mainly driven by a low-base effect.
"Our forecasts are subject to considerable risks due to the continued acceleration in the number of new COVID-19 cases as the lockdown is eased gradually. It remains to be seen whether India can return to sustained growth rates of 6% to 7% as we previously estimated, depending on the lasting impact of the pandemic, particularly in the financial sector," the ratings agency said in a statement.
Earlier this month, another rating agency, Moody’s Investors Service had downgraded India’s credit rating to a notch above junk, citing a prolonged period of slow growth in Asia’s third-largest economy, rising debt and persistent stress in parts of the financial system.
Moody’s maintained a negative outlook for the new sovereign rating, citing worsening government finances as the coronavirus continues to hurt the economy.
However, later S&P affirmed its rating on India’s long-term foreign and local currency sovereign credit at the lowest investment-grade level and retained its stable outlook on the economy. (With Agency Inputs)
