Fitch cuts India outlook to negative, maintains BBB- rating
|The US-based Fitch Ratings slashed India’s outlook from ‘stable’ to ‘negative’ on Thursday.
Additional points
Fitch maintained India’s sovereign rating at the lowest investment grade of 'BBB-'.
“The coronavirus pandemic has significantly weakened India’s growth outlook for this year and exposed the challenges associated with a high public-debt burden.”
“Economic activity to contract by 5% in the fiscal year ending March 2021 (FY21) from the strict lockdown measures imposed since 25 March 2020, before rebounding by 9.5% in FY22.”
"Our forecasts are subject to considerable risks due to the continued acceleration in the number of new COVID-19 cases as the lockdown is eased gradually. It remains to be seen whether India can return to sustained growth rates of 6% to 7% as we previously estimated, depending on the lasting impact of the pandemic, particularly in the financial sector."
“The medium-term fiscal outlook is of particular importance from a rating perspective, but is subject to great uncertainty and will depend on the level of GDP growth and the government's policy intentions."
Earlier this month, Moody’s Investors Service announced a downward revision to India’s sovereign credit rating to a notch just above junk. Although, the agency retained a negative outlook for the country.
Market reaction
Despite the outlook downgrade by Fitch, Indian rupee remains well bid against its American peer heading into the European open.
At the time of writing, USD/INR drops 0.20% to trade at 76.12.
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