Fitch Cuts India GDP Growth Forecast To 7% For FY23, 6.7% For FY24
Indian economy is expected to slow given the global economic backdrop, elevated inflation and tighter monetary policy, Fitch says.
Fitch Global Ratings has cut India’s GDP growth forecast expecting a global slowdown and a tighter monetary policy.
The ratings agency now expects the Indian economy to grow at 7% in FY23 compared with its earlier projection of 7.8%, according to its report on the global growth outlook. The estimates for FY24 have also been cut to 6.7% against 7.4% earlier.
The Reserve Bank of India, Fitch said, has already “frontloaded” its policy rates, tightening by a total of 140 basis points since the start of 2022 to 5.4% in August. “We expect the RBI to continue raising to 5.9% before year-end.”
“The economy recovered in Q2 FY23 with growth of 13.5% year-on-year, but this was below our June expectation of an increase of 18.5%,” Fitch said. Seasonally adjusted estimates show 3.3% quarter-on-quarter decline in Q2 FY23, though this seems to be at odds with high-frequency indicators.
Nevertheless, the economy, it said, is expected to slow given the global economic backdrop, elevated inflation and tighter monetary policy.
Inflation moderated in August as crude oil prices eased but the risk to food inflation persists given negative seasonality toward the end of this year, Fitch said. While the RBI expects monthly inflation data to be volatile in the near term, its expectation is for CPI to ease toward the end of the year.
The RBI remains focused on reducing inflation, but said its decisions would continue to be “calibrated, measured and nimble” and dependent on the unfolding dynamics of inflation and economic activity. “We therefore expect policy rates to peak the near future and to remain at 6% throughout next year.”