Indian Economy To Contract 10.5% In 2020-21

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It is an American credit rating agency and is one of the “Big Three credit rating agencies”
Fitch Ratings on Tuesday slashed its FY21 gross domestic product (GDP) forecast for India to a contraction of 5% from a contraction of 5% estimated in June,
Holding that limited fiscal support, fragilities in the financial system and a continued rise in virus cases hamper a rapid normalisation in activity.
About India Ratings
India Ratings and Research (Ind-Ra) is India’s credit rating agency committed to providing India’s credit markets accurate, timely and prospective credit opinions.
Ind-Ra currently maintains coverage of corporate issuers, financial institutions (including banks and insurance companies), finance and leasing companies, managed funds, urban local bodies, and structured finance and project finance companies.
Headquartered in Mumbai, Ind-Ra has seven branch offices located in Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Pune. Ind-Ra is recognised by the Securities and Exchange Board of India, the Reserve Bank of India and National Housing Bank.
Ind-Ra is a 100% owned subsidiary of the Fitch Group.
India Ratings, the India arm of Fitch, however, is more pessimistic about the Indian economy.
In a report released on Tuesday, India Ratings revised downward its FY21 GDP estimate for India to a decline of 8% from a contraction of 5.3% estimated earlier.
The latest estimates by Fitch and India Ratings are among the worst predictions for the Indian economy for the current financial year,
This may make it the deepest contraction so far in India’s history.
The previous lowest was a GDP contraction of 2% in FY80.

In its latest Global Economic Outlook for calendar year 2020,
Fitch revised upward its GDP estimate for the world to a contraction of 4.4% from a contraction of 4.6% estimated in June.
It revised upward its growth estimates for the
US (0.6%) and China (2%).

On rebound?

The rating agency said India’s GDP should rebound strongly in September quarter amid a re-opening of the economy,
But there are signs that the recovery has been sluggish and uneven.
Still-depressed levels of imports, two-wheeler sales and capital goods production.
The rating agency also confirmed that India was the worst performer in the June quarter among G20 countries.

Why slow recovery?

Fitch said multiple challenges are holding back the recovery in India, both in the short and medium term.
New cases of the coronavirus continue to increase.
The continued spread of the virus and the imposition of sporadic shutdowns across the country depress sentiment and disrupt economic activity.
The severe fall in activity has also damaged household and corporate incomes.
Spurt in inflation has added strains to household income.