Fitch Solutions Cuts India’s FY20 Economic Growth Forecast To 4.9%

On Monday, Fitch Solutions lowered India's economic growth forecast to 4.9 percent for the current financial year citing possible pressure on manufacturing due to weak domestic demand and supply chain disruptions amid coronavirus outbreak.

For the upcoming fiscal year 2020-21, it expects the country's GDP (gross domestic product) growth to recover with a projection of 5.4 percent.

"We at Fitch Solutions are revising down our forecast for India's real GDP growth to 4.9 per cent in FY2019/20, from 5.1 per cent previously, and 5.4 per cent in FY2020/21, from 5.9 per cent previously," the agency said in its outlook for India.

On Friday, official government data showed that India's GDP growth decelerated to 4.7 percent in December-ended quarter owing to slower government consumption, a steeper contraction in gross fixed capital formation and a smaller net exports contribution.

"A failure of the FY2020/21 Union Budget to provide support to the industry will also bring little reprieve for a sluggish industry already coming under heavy pressure from a credit squeeze following the collapse of several key Non-Bank Financial Companies (NBFCs)," it said.

NBFCs are key for lending to small businesses and the rural sector, the largest contributors to the country's GDP.

"Our revision is due to our view for disruption in the automotive and electronics supply chain from the ongoing Covid-19 outbreak in China to weigh on India's export manufacturing sector, and for this to have negative knock-on effects on the broad services sector," Fitch Solutions said.