Fitch Ratings on Tuesday slashed its FY21 gross domestic product (GDP) forecast for India to a contraction of 10.5% 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. 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. 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. Fitch said recent spurt in inflation has added strains to household income. “Supply-chain disruptions and excise duties increases have caused prices to rise. However, we expect inflation to slow amid weak underlying demand, an easing in supply-chain disruptions and a good monsoon,” it added.
