Fitch slashes India's GDP growth forecast to 7% in current fiscal

New Delhi, September 15

Fitch Ratings on Thursday slashed its projection of India’s economic growth to 7% for the current fiscal year, citing elevated inflation levels and higher interest rates.

Fitch, which had in June projected India’s GDP to grow by 7.8% in 2022-23, also forecast a slowdown in growth to 6.7% in FY24 from its earlier estimate of 7.4%.

In its Global Economic Outlook September 2022 released on Thursday, the rating agency said the GDP growth of 13.5% in April-June, as per official data, was below its June expectation of 18.5% increase.

“We expect the economy to slow given the global economic backdrop, elevated inflation and tighter monetary policy,” it said.

“Inflation moderated in August as crude oil prices eased, but the risk to food inflation persists given negative seasonality towards the end of this year.” The wholesale-price-based inflation softened to 11-month low of 12.41% in August, even though retail inflation inched up to 7%.

Fitch joins other agencies who have downgraded India’s economic growth forecast following a below-expected 13.5% expansion in April-June (the first quarter of current fiscal year).

Moody’s Investors Service expects India’s GDP growth to slow from 8.3% in 2021 to 7.7% in 2022 and to decelerate further to 5.2% in 2023. In March, Moody’s had forecast that India’s economy could expand at 8.8% in 2022.

Citigroup has sharply cut its FY23 growth projection to 6.7% from 8% earlier while Goldman Sachs revised it to 7% from 7.2%.

SBI expects 6.8% growth from April 2022 to March 2023 (FY23) and India Ratings and Research (Ind-Ra) pegs it at 6.9%.

The Reserve Bank of India (RBI) expects the economy to grow at 7.2% in current fiscal year. — PTI

Global Economic Outlook

• Fitch, which had in June projected India’s GDP to grow by 7.8% in 2022-23, also forecast a slowdown in growth to 6.7% in FY24 from its earlier estimate of 7.4%
• In its September outlook released on Thursday, the rating agency said the GDP growth of 13.5% in April-June was below its June expectation of 18.5% increase
• The global ratings agency said core inflation, which excludes food, fuel and light, remained elevated at 6% while inflation expectations have also stayed high