Global credit rating agency Fitch on Tuesday raised its FY21 GDP growth forecast for India by predicting a narrower economic contraction of (-) 9.4 per cent from an earlier predicted fall of (-) 10.5 per cent.
"We now expect GDP to contract 9.4 per cent in fiscal year to end March 2021, followed by (+) 11 per cent and (+) 6.3 per cent in the following years," Fitch Ratings said in its latest Global Economic Outlook (GEO) for December.
"The coronavirus recession has nevertheless inflicted severe economic scarring. The need to repair balance sheets, increased caution about long-term planning, and firm closures will limit investment demand."
Furthermore, it pointed out that increased financial-sector weakness - amid deteriorating asset quality - will hold back credit provision.
"The failure of another bank in recent weeks - the third failure in the past 16 months -underlines the challenges in the financial sector," the December GEO said.
Recently, India recorded a faster than anticipated economic recovery.
The country's GDP contracted 7.5 per cent in the July-September period, as the economy rebounded from a record slump of 23.9 per cent in the previous quarter due to slowdown caused by the coronavirus pandemic.