Fitch Ratings in its latest report said that It has cut India's growth forecast to 10 per cent for the current financial year (FY22), from 12.8 per cent estimated earlier, due to slowing recovery post-second wave of COVID-19. It said the challenges for the banking sector posed by the coronavirus pandemic have increased due to a virulent second wave in the first quarter of the financial year ending March 2022 (FY22).
The global rating agency said ‘It revised down India's real GDP for FY22 by 280bp to 10 per cent, underlining our belief that renewed restrictions have slowed recovery efforts and left banks with a moderately worse outlook for business and revenue generation in FY22.’ Besides, it believes that rapid vaccination could support a sustainable revival in business and consumer confidence; however, without it, economic recovery would remain vulnerable to further waves and lockdowns.
It said localized lockdowns during the second wave kept economic activity from stalling to levels similar to those during 2020, but disruption in several key business centers has slowed the recovery and dented its expectations of a rebound to pre-pandemic levels by FY22. India's economy contracted 23.9 per cent in the June quarter of 2020. Fitch views India's rebound potential to be better than most comparable 'BBB-' peers because it does not expect a structurally weaker real GDP growth outlook.