Fitch Ratings cuts India’s GDP growth outlook for this FY 2021

Fitch Ratings recently slashes its development estimated for India from 5.6% to 5.1% for 2020-21, as Covid-19 comes to the country’s producers after supply chain problems in China.

Fitch unites with a chorus of global companies that have made alike observations in the past few days. Standard and Poor’s (S&P) recently had slashed its this year’s growth estimation for India from 5.7% to 5.2% as it feared that the Asia Pacific area might slide into a slump with countries starting lock-downs to have the pandemic.

Moody’s and the Organisation for Economic Cooperation and Development (OECD) have decreased their estimation for India to 5.3% and 5.1%, respectively.

The number of confirmed COVID-19 cases in India was still low when compared to the population, said Fitch.

The disadvantage of this situation is that the market will be affected, as local governments come out with measures, like closing the schools, cinemas, and theatres, to contain the spread of the virus. “While India’s linkages with China (e.g. trade and tourism) are modest, manufacturers in India are heavily reliant on key Chinese intermediate inputs—especially of electronics (60%) and machinery and equipment (47%). Supply-chain disruptions are expected to hit business investment and exports.”

The problems of the Indian economy got worse by the fall of Yes Bank, it noted.

Crisil Ltd in a research note stated that the country’s growth will be effected via decreased demand for exports, given the fall in international growth and supply chain disruptions.

Even on the country level, it has been predicted that both services and industrial sectors will undergo the crises, Crisil noted.

“As revenue streams of firms get impacted, employment, particularly of daily wagers and temporary workers, will be in the firing line. Anecdotal evidence suggests hit to services such as restaurants, transport (including air and ground), entertainment/film industry, tours, and travel, retailing and sports events, which could intensify if the crisis worsens leading to prolonged lockdowns,” Crisil concluded.