Indian economy will bounce back with a sharp growth rate of 9.5% in FY’22 provided it is able to further avoid the deterioration in financial sector health. This, said Fitch Ratings, will be post the contraction in the current financial year caused by the adverse impact of COVID-19. Fitch Ratings has forecast a 5% contraction in India’s GDP in FY’21.
Indian economy will bounce back with a sharp growth rate of 9.5% in FY’22
"The pandemic has drastically weakened India's growth outlook and laid bare the challenges caused by a high public-debt burden," stated Fitch Ratings in its APAC Sovereign Credit Overview. The agency also expects that India’s public debt to GDP ratio will rise to 84% primarily due to the slow economic growth and wider fiscal deficits.
However, the ratings agency is positive on the post-crisis scenario. "After the global crisis, India's GDP growth is likely to return to higher levels than 'BBB' category peers, provided it avoids further deterioration in financial sector health as a result of the pandemic," it added forecasting a 9.5% real GDP growth next year.
The RBI and the government have been working hand in hand to revive growth amid a challenging economic scenario. On one hand the RBI has cut policy rates and provided liquidity through long-term repo operations, on the other hand the government has announced stimulus measures amounting to 10% of GDP.