Fitch Ratings cut its FY22 growth forecast for India from 10 percent to 8.7 percent, citing the severe second coronavirus wave, which it said would ‘delay rather than derail’ economic recovery. Accordingly, it raised the growth forecast for FY23 to 10 percent from 8.5 percent estimated earlier.

In its Asia-Pacific (APAC) Sovereign Credit Overview, Fitch Ratings said India's 'BBB-/Negative' sovereign rating "balances a still-strong medium-term growth outlook and external resilience from solid foreign- reserve buffers, against high public debt, a weak financial sector and some lagging structural factors".

The 'Negative' outlook, it said, reflects uncertainty over the debt trajectory following the sharp deterioration in India's public finances due to the pandemic shock. Fitch said it has further lowered India's GDP forecast for the fiscal year ending March 2022 (FY22) to 8.7 percent from 10 percent in June as a result of the severe second virus wave.

Fitch had in June cut the growth forecast from 12.8 percent. The projections for 2021-22 fiscal compares to a contraction of 7.3 percent recorded in the last financial year and a 4 percent growth in 2019-20. "In our view, however, the impact of the second wave was to delay rather than derail India's economic recovery, reflected in an upward revision of our FY23 GDP forecast to 10 percent from 8.5 percent in June," it said.

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