Fitch on Thursday lowered the outlook on India’s long-term foreign currency issuer default rating (IDR) to ‘negative’ from ‘stable’ but affirmed the rating at the lowest investment grade of ‘BBB-’.
Fitch Ratings expects economic activity to contract by 5 per cent in the fiscal year ending March 2021 (FY21) from the strict lockdown measures imposed since March 25, 2020, before rebounding by 9.5 per cent in FY22.
The Fitch move has come after Standard & Poor’s retained the ratings and outlook on India at ‘BBB-’, while Moody’s Investors Service downgraded the ratings to ‘Baa3’from ‘Baa2’ but maintained the outlook.
On the revision of the outlook to negative, Fitch said the pandemic has significantly weakened India’s growth outlook for this year and exposed the challenges associated with a high public-debt burden. “The rebound will mainly be driven by a low-base effect. 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 said.
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