After Standard & Poor’s, global rating agency Fitch on Friday reaffirmed India’s sovereign rating at ‘BBB-’ with stable outlook, despite factoring in an expected moderate fiscal slippage relative to the central government’s deficit target of 3.3% of GDP in FY20.
“India’s rating balances a still strong medium-term growth outlook compared with ‘BBB’ (lowest investment) category peers and relative external resilience stemming from solid foreign-reserve buffers against high public debt, a weak financial sector and some lagging structural factors, including governance indicators and GDP per capita,” Fitch said in a statement.
Fitch Ratings also retained its December 5 projection for India. It had trimmed India’s economic growth projection by a massive 90 basis points to 4.6% for FY20 on the back of a sharp squeeze in credit availability, weighing on consumption and investment. This means Fitch expects the current slowdown to worsen even further because growth in the June and September quarters stood at 5% and 4.5%, respectively, thus, averaging around 4.75% in the first half of this fiscal.
Earlier, S&P had also reaffirmed India’s sovereign rating at ‘BBB-’ with stable outlook citing impressive long-term growth rates despite a recent deceleration, economic affairs secretary Atanu Chakraborty had tweeted on December 3.
“We believe there is a risk of more significant fiscal loosening in the event of continued weak GDP growth, for example, in the context of lingering problems in the NBFC sector,” Fitch said.
Fitch expects government debt level of 70.4% of GDP in FY20 (‘BBB’ median: 41.1%) and a general government deficit of 7.5% of GDP (‘BBB’ median: 1.8%). “We consider it highly unlikely that the government will comply with the general government debt ceiling of 60% of GDP by March 2025, as stipulated in the Fiscal Responsibility and Budget Management Act,” the rating agency said.
Observing that what was once an investment-led slowdown has now broadened into weakening consumption, Moody’s on Monday cut its FY20 GDP growth forecast for India steeply to 4.5% from 5.8% predicted in October.
Source: Financial Express