Fitch has also revised the outlook on Hindustan Petroleum Corporation to negative from stable and affirmed the long-term IDR at BBB-minus.
The negative outlook on India reflects the country's weakened growth prospects and challenges associated with a high public-debt burden. Fitch expects GDP to contract by 5 per cent in the fiscal year ending March 2021 (FY21) following strict lockdown measures imposed since March 25 to curb the spread of the coronavirus.
Besides, said Fitch, India's fiscal metrics have deteriorated significantly despite the government's expenditure restraint due to the impact of the severe growth slowdown on revenue, the fiscal deficit and public-sector debt ratios.
The agency expects general government debt to jump to 84.5 per cent of GDP in FY21 from an estimated 71 per cent of GDP in FY20. Weak implementation of fiscal rules stipulated in the Fiscal Responsibility and Budget Management Act contributes to Fitch's view that a speedy fiscal improvement after the pandemic recedes is unlikely.
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