American credit rating agency Fitch Ratings’ company India Ratings and Research revised its growth forecast for India in the 2020-’21 financial year to 5.1%, saying a crisis is likely to envelop the economy as the coronavirus pandemic continues to hit investments and exports globally. Last year, the credit rating agency had revised its forecast in the 2019-’20 financial year to 5.6%.

In its Global Economic Outlook 2020, the agency predicted a rise in the number of people affected by the coronavirus in the coming weeks. “But the outbreak will remain contained,” it added.

“Supply-chain disruptions are expected to hit business investment and exports,” the agency said. “We see the Gross Domestic Product growth to remain broadly steady at 5.1% in the fiscal year 2020-2021 following growth of 5.0 per cent in 2019-2020.” The credit rating agency further projected India’s growth rate in the 2021-’22 financial year to be at 6.4%

It said that while India’s economic linkages with China – the epicentre of the pandemic – in industries such as trade and tourism are modest, manufacturing units, however, are still heavily reliant on Beijing for several intermediate resources. This is especially the case in electronics and machinery sectors, it added.

Fitch Ratings’ added that India’s economic crisis has been further compounded by the “Yes Bank failure”. The central bank had on March 5 taken control of Yes Bank, after the lender – which is laden with bad debts – failed to raise the capital it needs to stay above mandated regulatory requirements. Placing Yes Bank under a 30-day moratorium, the central bank had imposed a limit of Rs 50,000 on withdrawals to protect depositors.

“Fragilities in the financial system will further undermine sentiment and domestic spending,” the credit rating agency observed. “The overall financial system remains burdened with weak balance sheets, which will limit any upside to credit and growth despite policymakers’ efforts in recent months to ease stresses.”

COVID-19 has infected more than 244,000 people and killed over 10,000, according to an estimate from John Hopkins University, which is live-tracking cases reported by the World Health Organization and additional sources.

The global economic meltdown triggered by the pandemic, comes at a time when confidence in the Indian economy is giving way to uncertainty because of continued slump in manufacturing. In February, India’s economic growth slipped to a nearly seven-year low of 4.7% in the October-December, according to government data.

The Indian economy grew just 4.5% in the second quarter of the 2019-’20 financial year, the slowest in six years. The government has forecast an annual growth rate of just 5% for the current financial year, the slowest in 11 years. In the last few months, core sectors such as automobiles and manufacturing have progressively slowed down because of weakened consumer demand and dearth of investments.