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Rating duo flash deficit warning

Fitch: Growth this fiscal at -5%. Next fiscal 9.5% growth; S&P: Long-term sovereign rating stays at BBB- with stable outlook
Fitch also forecast a 5 per cent contraction in GDP in the ongoing financial year.   India’s economy is forecast to bounce back with a sharp growth rate of 9.5 per cent next year provided it avoids further deterioration in financial sector health.
Fitch also forecast a 5 per cent contraction in GDP in the ongoing financial year. India’s economy is forecast to bounce back with a sharp growth rate of 9.5 per cent next year provided it avoids further deterioration in financial sector health.
(Shutterstock)

Our Special Correspondent   |   New Delhi   |   Published 10.06.20, 08:40 PM

Rating agencies S&P and Fitch said they were concerned with government debt levels. Fitch Ratings on Wednesday cautioned that the lack of a credible medium-term strategy to stabilise rising public debt after the coronavirus crisis subsides could put downward pressure on its sovereign rating.

Fitch also forecast a 5 per cent contraction in GDP in the ongoing financial year. India’s economy is forecast to bounce back with a sharp growth rate of 9.5 per cent next year provided it avoids further deterioration in financial sector health.

“The pandemic has drastically weakened India’s growth outlook and laid bare the challenges caused by a high public-debt burden,” Fitch said .

Meanwhile, Standard and Poor’s 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 on Wednesday.

India’s long-term rating was affirmed at “BBB-” with a stable outlook while the short-term rating was held at “A-3”.

The agency also assumes that the government’s fiscal deficit will recede markedly following a multi-year high this financial year. “India's strengths are balanced against vulnerabilities stemming from consistently elevated fiscal deficits that contribute to high general government debt, net of liquid assets.”

The OECD has warned the global economy could shrink 7.6 per cent if the virus re-emerges later in the year. Its best case scenario is growth of 6 per cent in 2020. 



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