Fitch lowers ratings to ‘negative’ for India

The coronavirus pandemic and the lockdown has significantly weakened India's growth. After Moody's, credit ratings agency Fitch has also revised it's outlook on India

1. COVID-19 and lockdown has weakened India's growth

Fitch revised its outlook on India to "negative" from "stable", and affirmed the rating at "BBB-" -  the lowest investment grade.

2. Fitch revised it's outlook on India as "negative" with lowest rating at "BBB-"

The coronavirus pandemic has not only weakened India's growth outlook for this year but has also exposed the challenges associated with a high public-debt burden, Fitch said.

3.Fitch exposed the challenges associated with a high public-debt burden

The change in its outlook on India's long-term foreign-currency issuer default rating comes days after another rating agency, S&P, also retained the country's sovereign rating at the "BBB-" with a stable outlook.

4.Before Fitch, S&P also retained India's rating at "BBB-"

Fitch said it expects economic activity in the country to contract 5 per cent in the current fiscal year from the strict lockdown measures imposed since March 25 2020.

5.Lockdown lowered the economic activity by 5%

However, the ratings agency reiterated that gross domestic product (GDP) in the country will grow 9.5 per cent in the next fiscal year (2021-22), with the rebound mainly driven by a low-base effect

6. The GDP will grow 9.5 % next fiscal year

The agency said its 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".

7.The forecasts are subject to considerable risks due to acceleration in COVID-19 cases:Fitch

"The humanitarian and health needs have been pressing, but the government has shown expenditure restraint so far, due to the already high public-debt burden going into the crisis, with additional relief spending representing only about 1 per cent of GDP by our estimates.

8.The relief by government is just 1% of the GDP:Fitch

Most elements of an announced package totalling 10 per cent of GDP are non-fiscal in nature," Fitch said.

9. Most elements of the stimulus package are non-fiscal : Fitch

Last month, the government provided details of fiscal and monetary support worth Rs 21 lakh crore - equivalent to 10 per cent of GDP - to help the country battle the fallout from the coronavirus pandemic

10. Government falsely claimed the package to be 10 % of the GDP

However, economists say that much of this has already been budgeted for by the government and very little includes new spending.

11.Most of the measures of the package were already budgeted: economists

"Some further fiscal spending of up to 1 percentage point of GDP may still be announced in the next few months, which was indicated by a recent announcement of additional borrowing for FY21 of 2 per cent of GDP, although we do not expect a steep rise in spending," Fitch said.

12. Rise in spending is not expected: Fitch

The credit ratings major said it expects the government debt to jump to 84.5 per cent of GDP in the current fiscal year, from an estimated 71.0 per cent of GDP in 2019-20.

13 Fitch also expects the government debt to jump to 84.5%

The country's medium-term GDP growth outlook may be negatively affected by renewed asset-quality challenges in banks and liquidity issues in non-banking financial companies (NBFCs), according to Fitch.

14.India's growth outlook is negatively affected due to liquidity challenges