Fitch Rating has revised down India’s GDP growth forecast for the current fiscal to 10 percent from 12.8 percent forecasted earlier.
“Fitch Ratings 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,” report said.
The agency estimates India’s medium term growth potential at about 6.5 per cent. 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.
However, 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. However, there is a risk that India’s medium-term growth could suffer if the business and consumer activity were to experience scarring from the COVID-19 pandemic.
Fitch expects banks’ exposure to stressed MSME and retail borrowers to rise further with the increasing relief outlay, and is likely to compel banks – especially state-owned ones – to slow regular lending in the absence of adequate core capital cushions and weak contingency buffers.
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