Chennai: Even as the Indian economy is feared to have hit hard by the Covid-19 crisis, observations by leading organisations suggest that it would revive soon.
S&P Global Ratings has retained India’s lowest investment grade (BBB-) credit rating with stable outlook as it expects the country’s economy and fiscal position to stabilise and begin to recover from 2021 onwards.
“While risks to India’s long-term growth rate are rising, ongoing economic reforms, if executed well, should keep the country’s growth rate ahead of peers. The economic hit from Covid-19 will exacerbate India’s weak fiscal settings. We expect a materially larger fiscal deficit this year, followed by consolidation over the next three years,” S&P said.
Stating that the outlook is stable, the agency said though risks to long-term growth are rising, India’s ratings reflect the country’s above-average real GDP growth, sound external profile and evolving monetary settings.
It has forecast India’s economy to shrink by 5 per cent in the current fiscal. It, however, has projected GDP growth to be 8.5 per cent in 2021-22 and 6.5 per cent in 2022-23.
In a statement, S&P said, “While risks to India’s long-term growth rate are rising, ongoing economic reforms, if executed well, should keep the country’s growth rate ahead of peers.”
It added: “India’s strong democratic institutions promote policy stability and compromise and also underpin the ratings. These strengths are balanced against vulnerabilities stemming from the country’s low per capita income and consistently elevated fiscal deficits that contribute to high general government debt, net of liquid assets.”
Meanwhile, Indian enterprises are expected to rebound faster than American coprorates, a survey by All India Manufacturers Organisation (AIMO) reveals this as compared with survey from ‘Fortune’. “This is a matter of pride as an Indian entrepreneur,” says K E Raghunathan, former national president of AIMO.