"Our forecasts are subject to considerable risks due to the continued acceleration in the number of new Covid-19 cases as the lockdown
is eased gradually. It remains to be seen whether India can return to sustained growth rates of 6 per cent to 7 per cent as we previously estimated, depending on the lasting impact of the pandemic, particularly in the financial sector," it said on Thursday.
Now, all the rating agencies have the lowest investment grade for India's sovereign ratings. Fitch and Moody's have negative outlook and S&P
Fitch said the coronavirus
pandemic has significantly weakened India's growth outlook for this year and exposed the challenges associated with a high public-debt burden.
The rating agency said the humanitarian and health needs have been pressing, but the government has shown expenditure restraint so far, due to the already high public-debt burden going into the crisis, with additional relief spending representing only about one per cent of the gross dmestic product (GDP).
It said most elements of an announced package totalling 10 per cent of GDP are non-fiscal in nature.
"Some further fiscal spending of up to 1 percentage point of GDP may still be announced in the next few months, which was indicated by a recent announcement of additional borrowing for FY21 of 2 per cent of GDP, although we do not expect a steep rise in spending," it said.
It said fiscal metrics have deteriorated significantly, notwithstanding the government's expenditure restraint, due to the impact of the severe growth slowdown on revenue, the fiscal deficit and public-sector debt ratios.
Fitch expected general government debt to jump to 84.5 per cent of GDP in FY21 from an estimated 71.0 per cent of GDP in FY20.
"This is significantly higher than the median of 42.2 per cent of GDP for the 'BBB' category in 2019, to which FY20 corresponds, and 52.6 per cent for 2020," it said.
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