On April 23, 2020, Fitch Ratings Inc, an American credit rating agency in its ‘Global Economic Outlook (GEO)’, has lowered India’s GDP (Gross Domestic Product) growth forecast to 0.8% for Fiscal year 2020-21 (FY 21), a revision from the 2% that was projected just three weeks ago.
It revised its projection due to the global economic downturn caused by the spread of coronavirus (COVID-19) and Lockdown in India.Key Points:
i.Comparison: Prior to this, Fitch had predicted India’s economic growth for the financial year (FY 20) at 4.9 %. However, the agency expects the growth rate in 2021-22 (FY 22) at 6.7 %.
ii.Quarter estimates: The rating agency estimates that there will be negative growth in the current financial year for two consecutive quarters. In the first quarter of April to June 2020, economic growth fell to -0.2 % and to -0.1 % in July-September 2020.Growth is expected to rebound to 1.4 per cent in the last quarter of 2020 calendar year.
iii.Global GDP: As per the agency, the world GDP is projected to decline by 3.9 % in 2020, which will have double the impact of the 2009 recession.
iv.Reason for the decline: The main reason for India’s economic downturn is the decline in spending habits among consumers. This means that people will spend only 0.3 % of the current fiscal year (FY 21), compared to 5.5 % in FY 20.
v.Impact: The fall in global GDP will result in a loss of $ 2.8 trillion against the global income of 2019. Corona will incur a loss of $ 4.5 trillion against the earlier GDP estimate.
About Fitch Ratings:
President– Ian Linnell
Headquarters– New York, United States (US)