Fitch Ratings for India dip amid pandemic

Recent highlights regarding Fitch ratings:

• India’s growth will slip to 0.8% in FY21, FR predicts.
• Fitch’s downgrade STFC and Muthoot finance by 17%
• Ratings for APAC thermal power projects remain unaffected.
• The global economy might shrink by 3.9% in 2020, predict FR.

Before we begin, let’s understand what Fitch Ratings is. Now, I don’t claim to be a financial expert, so bear with me. Fitch Ratings Inc. is basically an agency of analysts. They publish opinions, known as ratings, on various scales. Along with Moody’s and Standard & Poor’s, Fitch makes up the big three credit agencies. These three are nationally recognized statistical rating organizations that started in 1975. 

Thursday saw a sharp decrease in India’s economic growth. Fitch Rating slashes the growth projections to 0.8 percent in 2020-21 FY. It says that an incomparable global recession is underway owing to the problems engendered by the wave of COVID-19 pandemic and resultant lockdowns. 

India’s GDP growth will inevitably dip to 0.8 percent in fiscal year 21 (April 2020- March 2012), as compared to 4.9 percent growth during the previous year. Fitch Ratings announced its predictions in its GEO —global economic outlook.

However, we can expect the growth to rebound to a good 6.7 percent during 2021-22. 

There have been two predictions made by the agency. We can observe two consecutive quarters of negative growth in current fiscal:

1. (-)0.2 percent in April-June
2. (-)0.1 percent in July-September. 

This is in comparison to the estimated growth of 4.4 percent in January-March. 

Though, we can expect the growth to rebound to 1.4 percent during the last quarter of the 2020 year. 

Fitch said there are many reasons for the slump in FY21 growth. The main reason, though, is the projected fall in consumer spending. It has been clocked at just 0.3 percent in FY21. This a drop from 5.5 percent last year. There is also a contraction of 3.5% in fixed investment. 

Furthermore, large cuts have been made to global GDP forecasts by the agency. In its latest Global Economic Outlook (GEO), it made the cuts as a resultant to COVID-19 related lockdowns, extensions, and incoming data.

Brian Coulton is the Chief Economist at Fitch Ratings. He has said that expectations are there about a fall in world GDP. It might fall by 3.9% this year. The recession might be unprecedented.

It is expected to be twice as critical as the 2009 recession. No country or region will be spared from the disastrous impact due to the global pandemic. 

The decline in GDP might as well be equated to a USD 2.8 trillion. This is a fall in income levels worldwide. These numbers come in relation to 2019 and a loss of USD 4.5 trillion relative to pre-virus expectations of 2020 global GDP. 

While these numbers bring about a feeling of impending doom, we have to sit tight and hope for a better outcome. If push comes to shove, we have to stay prepared.

Sourced from Fitch Ratings, Financial Express.