Fitch Ratings has slashed its growth forecast for India for the current fiscal year to 7 percent from the previous estimate of 7.8 percent.
The ratings agency also cut its GDP growth forecast for the next fiscal year to 6.7 percent from the earlier estimate of 7.4 percent, it said on September 14.
Fitch’s latest growth estimate for FY23 is lower than the Reserve Bank of India’s (RBI) forecast of 7.2 percent.
“The economy recovered in 2Q22 (April-June) with growth of 13.5 percent, but this was below our…expectation of an increase of 18.5 percent,” Fitch said in an update to its Global Economic Outlook report.
“Seasonally adjusted estimates show a 3.3 percent quarter-on-quarter decline in 2Q22 though this seems to be at odds with high-frequency indicators,” Fitch added.
A favourable base effect helped propel Indian GDP growth to 13.5 percent in April-June. However, not only was this lower than Fitch’s expectations, it was also lower than the RBI’s forecast of 16.2 percent and economists’ expectations of 15 percent, as per a Moneycontrol poll.
While the April-June GDP data disappointed, going ahead, Fitch expects the Indan economy to slow down given the global economic backdrop, elevated inflation, and tigthening of monetary policy.
As part of the update to its Global Economic Outlook report, Fitch also cut its global growth forecast, citing the European gas crisis, high inflation, and a sharp acceleration in the pace of global monetary policy tightening.
Fitch now expects the global economy to grow by 2.4 percent in 2022, down from 2.9 percent previously. In 2023, growth is seen at 1.7 percent as against the previous forecast of 2.7 percent