Home >News >India >Indian economy might harken back to liberalisation era in FY21: Fitch Ratings

New Delhi: Fitch Ratings has sharply reduced its FY21 growth projection for India to 2% from 5.1% estimated just 15 days ago, as Asia's third largest economy announced a nationwide lockdown that crippled normal economic activity. This will be the slowest since the economy was liberalised 30 years back.

The growth forecast by Fitch released on Friday as an update to its Global Economic Outlook (GEO) is the lowest among the major rating agencies such as S&P (3.5%) and Moody’s (2.5%).

Fitch said the speed with which the coronavirus pandemic is evolving has necessitated another round of huge cuts to its global GDP forecasts. “We now expect world economic activity to decline by 1.9% in 2020 with US GDP down by 3.3%, the eurozone down by 4.2% and the UK down by 3.9%. China’s recovery from the disruption in 1Q20 will be sharply curtailed by the global recession and annual growth will be below 2%. These numbers are much worse than the baseline (and downside variant) of the March 2020 GEO forecast published on 19 March, when we expected global growth of over 1%," it said.

The rating agency said the lockdown policies being implemented in many countries are having instantaneous and dramatic effects on daily economic activity with full nationwide lockdowns reducing daily activity by about 20% relative to normal levels. “The impact on GDP will depend on how long the lockdowns last. By means of illustration, a two- to three-month crisis with a five week ‘peak stringency’ national lockdown period that reduces GDP by 20% a day would translate to a 7% to 8% decline in quarterly GDP. This is in fact in line with our latest estimate of the sequential quarter on quarter decline in China’s GDP in 1Q20 (which included a full lockdown period of four or five weeks) and we have used this as a guide in our baseline forecasts," Fitch said.

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