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Fitch slashes India growth forecast to 7.2%

buy provigil in thailand Fitch Ratings on Thursday slashed India’s GDP growth forecast to 7.2 per cent for the current fiscal, from 7.8 per cent projected in September, citing higher financing cost and reduced credit availability.

cheap Lyrica online In its Global Economic Outlook released on Thursday, Fitch estimated India’s GDP growth to be 7 per cent and 7.1 per cent in financial years 2019-20 and 2020-21 respectively.

see url The Indian economy grew by 6.7 per cent in the 2017-18 fiscal.

The 7.2 per cent GDP growth for the current fiscal is substantially lower than 7.8 per cent and 7.4 per cent projections made by Fitch in September and June, respectively.

It is also lower than RBI’s 7.4 per cent growth estimates for this fiscal.

We have lowered our growth forecasts on weaker-than-expected momentum in the data (GDP), higher financing costs and reduced credit availability. We now see GDP growth at 7.2 per cent in the fiscal year ending March 2019 (FY19), followed by 7.0 per cent in FY20 and 7.1 per cent in FY21, Fitch said.

In September, the rating agency had forecast 2019-20 and 2020-21 GDP growth at 7.3 per cent.

Fitch said GDP growth has “softened quite substantially” in the July-September quarter of the current fiscal growing by 7.1 per cent, as against 8.2 per cent in April-June.

“Consumption was the weak spot, stepping down from 8.6 per cent to 7 per cent, though still growing at a healthy rate. Other components of domestic demand fared well, notably investment, which has been steadily strengthening since 2H17. The external sector was again a significant drag on overall GDP amid steadily accelerating imports,” Fitch said.

The global rating agency said India’s fiscal policy should continue to support growth in the run-up to elections in early 2019 and forecast the Indian rupee to weaken to 75 to a dollar by the end of 2019.

The rupee is currently hovering around 71 per dollar.

“Stepped-up public investment has helped to stem the downward trend in the investment/GDP ratio, boosted by infrastructure spending. There have also been measures to support rural demand,” it added.

It said the banking sector is still struggling with a high proportion of non-performing assets, while non-banking financial institutions (NBFIs) are facing tighter access to liquidity following the default of IL&FS, one of the 30 biggest NBFIs in India.

NBFIs have accounted for a large share of all lending in recent years and have expanded credit rapidly, it said.

So far, the Reserve Bank of India (RBI) has dismissed calls by the government to provide emergency liquidity and to ease lending restrictions on the maximum volume of lending that state-run banks can provide to NBFIs, Fitch added.

Fitch said it expects inflation to edge up mildly in the coming months, on normalising food prices and higher import prices stemming from the depreciation of the rupee.

“The widening of the current account deficit amidst tighter global financing conditions should put downward pressure on the currency, and we forecast the INR to weaken to 75 against the dollar by end-2019,” it said.

Fitch, however, retained its global GDP forecasts for 2018 and 2019 at 3.3 per cent this year and 3.1 per cent next year.

It also retained China’s growth projections at 6.6 per cent in 2018 and 6.1 per cent in 2019.

With regard to crude prices, Fitch expects them to recover somewhat from the current levels, with OPEC likely to agree to some production cuts at its early December meeting.

The 2020 oil price forecast has been revised upwards to $62.5 from $57.5 projected in the September outlook of Fitch.

The price of Indian basket of crude oil fell below $60 to a barrel by end November, from $85 to a barrel in early October.

(PTI)

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