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Fitch Ratings in its latest report has revised India's Gross domestic product (GDP) growth estimate to 12.8 percent for the next fiscal year beginning April 1 from its previous estimate of 11 percent. It also said that India's recovery from the depths of the lockdown-induced recession in 2020 (calendar year) has been swifter than expected. It also said revision is on the back of a stronger carryover effect, a looser fiscal stance and better virus containment. Nevertheless, it expects the level of Indian GDP to remain well below its pre-pandemic forecast trajectory.

According to the report, the rapid pace of expansion at the end of 2020 was powered by falling virus cases and the gradual rollback of restrictions across States and Union territories. High-frequency indicators point to a strong start to 2021. It also said the manufacturing PMI remained elevated in February, while the pick-up in mobility and a rise in the services PMI point to further gains in the services sector. However, it said the recent flare up in new virus cases in some states has prompted us to expect milder growth in 2021.

The rating agency further said spending is set to be increased substantially, notably infrastructure, healthcare, and military outlays. Looser fiscal policy should support the short-term cyclical recovery, which along with stronger underlying growth momentum prompted FY22 GDP growth forecast revision. It stated that the increase in inoculation to the most at-risk people should allow restrictions to be eased significantly towards end-2021 and in 2022. This should further support services sector activity and consumption. However, it said an impaired financial sector is likely to keep the provision of credit tight, limiting investment spending.