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Fitch Ratings, in its latest note, assessed the impact of India’s massive USD 266 billion stimulus package against the coronavirus crisis.

Key quotes

“About half of the package amount covers fiscal measures that had previously been announced and also include the estimated economic impact of monetary stimulus from the Reserve Bank of India (RBI). “

“A seeming reluctance for fiscal expansion by the central government amid the Covid-19 crisis in India also poses a significant downside risk to its 1.”

“India’s economic crisis is growing increasingly dire due to surging Covid-19 infections and weak demand both domestically and externally. We believe that every delay to effective government stimulus will only deepen the downturn, which will eventually require even more spending to lift the economy out of doldrums, which could see the deficit come in wider.”

The new fiscal stimulus announced between May 13 and 17 is “made up of the government loan guarantees, credit extensions to be led by banks, and regulatory amendments.”

“We see the package as being lacking in addressing the immediate concerns of the economy and have revised our central and combined deficit forecasts for FY2020/21 (April-March) to 7% and 11% of GDP respectively, from 6.2 % and 9% previously, “