New Delhi: Fitch Ratings on Thursday slashed India’s GDP growth forecast for FY13 to 7 per cent, saying the economy is expected to slow down against the backdrop of global economic growth, high inflation and high interest rates. .
In June, it had forecast a growth of 7.8 per cent for India.
“We expect the economy to slow down given the global economic backdrop, high inflation and tight monetary policy. We now expect the economy to grow to 7 per cent in FY23 from 7.8 per cent by the end of March 2023 (FY23), with FY24 also slowing to 6.7 per cent from 7.4 per cent earlier,” Fitch said in its September edition. Said Global Economic Outlook.
According to official GDP estimates, the Indian economy expanded by 13.5 per cent in the June quarter, higher than the 4.10 per cent growth rate in January-March.
RBI expects the economy to grow at 7.2 per cent in the current financial year.
The rating agency said inflation moderated in August due to softening crude oil prices, but food inflation remains vulnerable to negative weather later this year.
Wholesale price-based inflation eased to an 11-month low of 12.41 per cent in August, though retail inflation rose to 7 per cent.
It said the RBI has already loaded its policy rate hikes with a total hike of 140 basis points from the beginning of 2022 to 5.4 per cent in August.
“We expect the RBI to continue to increase to 5.9 per cent before the end of the year. The RBI is focused on reducing inflation, but has said its decisions are “calibrated, measured and nimble” and will increase inflation and economic activity. Therefore, we expect policy rates to peak in the near future and remain at 6 percent throughout the next year,” Fitch said.
The US-based agency said it expects the rupee to stand at 79 against the US dollar by the end of 2022, while retail inflation is around 6.2 per cent.
It said supply shocks and inflation were severely affecting the world economy and expected world GDP to grow 2.4 per cent in 2022 – revised up by 0.5 percentage points.
In 2023, world GDP will grow at only 1.7 percent, which is 1 percent less than previous estimates.
“The eurozone and the UK are now expected to enter recession later this year and the US may face a mild recession in mid-2023,” Fitch said.
In China, it said recovery is constrained by pandemic restrictions and prolonged asset decline, while growth is projected to recover to 2.8 per cent this year and only 4.5 per cent next year.
“We have seen a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp rise in interest rates and a sharp drop in assets in China,” said Brian Coulton, chief economist at Fitch. rating.
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