MUMBAI, April 28 (Reuters) - Further deterioration in the fiscal outlook as a result of lower growth or fiscal easing could pressure the sovereign rating for India in light of the limited fiscal headroom it had when it entered the coronavirus crisis, rating agency Fitch said on Tuesday.
“Our assessment of India’s rating in such a case would be guided by our judgement of its probable medium-term fiscal path in the post-crisis environment,” Fitch analyst Thomas Rookmaaker wrote in the note.
“The government may tighten fiscal policy again once the pandemic is under control, but India’s record of meeting fiscal targets and implementing fiscal rules has been mixed in recent years, which will colour our assessment of any official commitment to tighten fiscal policy over the medium term.”.
Fitch also cut the country’s GDP growth forecast for fiscal year ending March 2021 to 0.8%, sharply down from its previous forecast of 5.6% before the coronavirus outbreak.
“We expect growth to rebound to 6.7% in FY22, but there is a risk that the crisis could amplify fiscal and financial sector strains and hurt the country’s growth prospects over the medium term.”
India has been in a nationwide lockdown for more than a month. The country has seen over 29,400 voronavirus cases and 934 deaths, while global cases have risen to over 3 million. (Reporting by Swati Bhat; Editing by Giles Elgood)