Fitch Ratings Cuts India's Growth Forecast To 5.1% For FY21

On Friday, Fitch Ratings cut India's growth forecast to 5.1 percent for the financial year 2020-21, saying the coronavirus outbreak is likely to hit business investment and exports. Fitch had previously projected India's growth at 5.6 percent for 2020-21 and 6.5 percent in the following year.

In its Global Economic Outlook 2020 report, Fitch said the number of people affected by coronavirus will keep rising in the coming weeks but that the outbreak will remain contained. However, there are downside risks to this scenario.

"Supply-chain disruptions are expected to hit business investment and exports. We see GDP growth to remain broadly steady at 5.1 percent in the fiscal year 2020-2021 following growth of 5.0 percent in 2019-2020," Fitch said.

For 2021-22, Fitch projected India's growth to be 6.4 percent.

"The outbreak of the virus is hitting sentiment, while local governments have rolled out measures to contain the spread of the virus, such as closing schools, cinemas and theatres. While India's linkages with China (e.g. trade and tourism) are modest, manufacturers in India are heavily reliant on key Chinese intermediate inputs - especially of electronics and machinery and equipment," Fitch said.

The difficulties facing the Indian economy have been exacerbated by Yes Bank failure, the rating agency said.

"Fragilities in the financial system will further undermine sentiment and domestic spending. The overall financial system remains burdened with weak balance sheets, which will limit any upside to credit and growth despite policymakers' efforts in recent months to ease stresses," Fitch added.