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India's GDP To Remain Well Below Pre-Pandemic Levels: FITCH

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The coronavirus-induced recession in India has been one of the most severe among major emerging markets (EMs) amid a stringent lockdown and limited direct fiscal support, FITCH Ratings has stated in its latest report.

 

"Growth will be supported by Fitch Ratings' expectation of the rollout of effective vaccines, but we expect the level of GDP to remain well below its pre-pandemic path even after the health crisis has passed. Strong Investment Has Underpinned Growth India's GDP growth has been buoyed by high rates of investment historically," the global ratings agency has said.

"Rapid capital accumulation over the last 15 years has boosted labour productivity growth. Growth in GDP per capita has been faster than most other large EMs, though it has lagged China. India's slower rate of "catch-up" with advanced economies than China reflects weaker total factor productivity (TFP) growth. This may be related to factors constraining the quality of investment and hampering progress in developing a large manufacturing export base," FITCH Ratings has added.

"Nevertheless, there is some evidence of improvement in TFP performance over the last five to seven years. But Large GDP Fall to Have Lasting Impact Against this backdrop, the current recession will leave lasting scars. We think the crisis will mean lower investment growth for some years. Slower capital accumulation will be the main source of weaker supply-side growth. Investment demand will be dragged down by the need to repair balance sheets and firm closures. Firms have received limited direct fiscal support, with the overall fiscal stance eased by only a little. Constrained credit supply amid a fragile financial system is another headwind to investment," the ratings agency has noted.

 

India's GDP To Remain Well Below Pre-Pandemic Levels: FITCH

Read more about: gdp fitch economy
Story first published: Thursday, January 14, 2021, 12:17 [IST]
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