Fitch affirms India’s sovereign rating, retains negative outlook

NEW DELHI:  Global ratings agency Fitch Ratings on Thursday affirmed India’s BBB- sovereign rating with a negative outlook as the second wave of the pandemic continues to result in a sharp increase in the case count. However, while the agency noted that the second wave may delay India’s economic recovery, it is unlikely to derail it. 

Fitch also projected a 12.8 per cent recovery in GDP in the fiscal year ending March 2022 (FY22), which it expects to moderate to 5.8 per cent for FY23. Fitch estimates India’s GDP saw a contraction of 7.5 per cent in 2020-21. Meanwhile, S&P Global projected a 11 per cent growth rate for India in the current fiscal, but warned that the control of Covid-19 remains a key risk for the economy.

Fitch said its India’s negative outlook “reflects lingering uncertainty around the debt trajectory following the sharp deterioration in India’s public finance metrics due to the pandemic shock from a previous position of limited fiscal headroom. Fitch has maintained a BBB- rating for India since August 2006, but its outlook has see-sawed due to the pandemic and the challenges associated with high public debt.

Fitch echoed S&P’s reading that the second wave poses increasing downside risks for FY22, but added that while it “may delay the recovery, it is unlikely... to derail it”. “We expect pandemic-related restrictions to remain localised and less stringent than the national lockdown imposed in 2Q20, and the vaccine rollout has been stepped up,” it added. 

India’s case count has surged,  recording 3,12,731 new infections in 24 hours the highest daily case count in a single country since the outbreak last year. Over the past few days and weeks, serious medicine and medical equipment shortages, such as for oxygen and prescription drugs have surfaced.