The agriculture reforms undertaken by the Indian government, which are facing oppositon from farmers, can increase the country's economic growth if implementation risks are addressed, Fitch Ratings said on Thursday while affirming India's sovereign rating at 'BBB-' with a negative outlook.
The rating agency said the Indian government remains reform-minded as evidenced by the passing of agricultural and labour market reforms. "These reforms could lift growth if implementation risks are addressed, particularly for the agricultural reforms which have met stiff resistance by farmers," it said.
The three farm laws -- Farmers (Empowerment & Protection) Agreement of Price Assurance & Farm Services Act 2020, Farmers Produce Trade & Commerce (Promotion & Facilitation) Act & Amendment to Essential Commodities Act -- are being opposed by the farmers.
Thousands of farmers, mainly from Punjab, Haryana and western Uttar Pradesh, have been protesting at the borders of Delhi against these laws for almost four months now.
Enacted in September last year, the three laws have been projected by the Central government as major reforms in the agriculture sector that will remove middlemen and allow farmers to sell their produce anywhere in the country. However, the protesting farmers say the laws would pave the way for eliminating the safety cushion of MSP (minimum support price) and do away with the "mandi" (wholesale market) system, leaving them at the mercy of big corporates.
Multiple round of negotiations between the government and farmer unions have failed in finding a solution. In January, the unions rejected the Centre's proposal to suspend the three laws for 18 months.
Fitch also said that the Production-Linked Incentives (PLI) scheme announced by the government could boost private sector investment.
The government has approved PLI schemes for various products like electronic and technology, white goods, solar PV modules, pharmaceutical drugs, among others, to boost domestic manufacturing and create jobs in the country.
In the medium-term, India's GDP growth is seen at around 6.5 per cent, Fitch said. The rating agency forecasted 12.8 per cent GDP growth for India in the fiscal year ending March 2022 (FY22) and said it will moderate to 5.8 per cent in FY23.