Fitch Ratings slashed India’s GDP growth projection for FY23 to 7 percent, saying the economy is expected to slow against the backdrop of the global economy, elevated inflation, and high-interest rate. In June, it had forecast 7.8 percent growth for India.
“We expect the economy to slow given the global economic backdrop, elevated inflation, and tighter monetary policy. We now expect the economy to grow 7 percent in the financial year to end-March 2023 (FY23) from 7.8 percent previously, with FY24 also slowing to 6.7 percent from 7.4 percent before,” Fitch said. As per official GDP estimates, the Indian economy expanded 13.5 percent in the June quarter, higher than the 4.10 percent growth clocked in January-March.
The RBI expects the economy to grow 7.2 percent in the current fiscal year. The rating agency said inflation moderated in August as crude oil prices eased but the risk of food inflation persists given negative seasonality towards the end of this year. The wholesale price-based inflation softened to an 11-month low of 12.41 percent in August, even though retail inflation inched up to 7 percent. It said the RBI has already front-loaded its policy rate hikes, tightening by a total of 140 basis points from the start of 2022 to 5.4 percent in August.
“We expect the RBI to continue raising, to 5.9 percent before year-end. The RBI remains focused on reducing inflation but said that 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 in the near future and to remain at 6 percent throughout next year,” Fitch said.
The US-based agency said it expects the rupee value to remain at 79 against the US dollar by the end of 2022, while the retail inflation is at around 6.2 percent. It said supply shocks and inflation are hitting the world economy hard and expects the world GDP to grow by 2.4 percent in 2022 – revised down by 0.5 percentage points.
In 2023, the world GDP will grow by just 1.7 percent, 1 percentage point lower than previous estimates. “The eurozone and UK are now expected to enter recession later this year and the US is expected to suffer a mild recession in mid-2023,” Fitch said.
In China, it said the recovery is constrained by the pandemic restrictions and a prolonged property slump while projecting growth to slow to 2.8 percent this year and recover to only 4.5 percent next year. “We’ve had something of a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp acceleration in interest rate rises, and a deepening property slump in China,” said Brian Coulton, Chief Economist, Fitch Ratings.
Fitch Ratings slashed India’s GDP growth projection for FY23 to 7 percent, saying the economy is expected to slow against the backdrop of the global economy, elevated inflation, and high-interest rate. In June, it had forecast 7.8 percent growth for India.
“We expect the economy to slow given the global economic backdrop, elevated inflation, and tighter monetary policy. We now expect the economy to grow 7 percent in the financial year to end-March 2023 (FY23) from 7.8 percent previously, with FY24 also slowing to 6.7 percent from 7.4 percent before,” Fitch said. As per official GDP estimates, the Indian economy expanded 13.5 percent in the June quarter, higher than the 4.10 percent growth clocked in January-March.
The RBI expects the economy to grow 7.2 percent in the current fiscal year. The rating agency said inflation moderated in August as crude oil prices eased but the risk of food inflation persists given negative seasonality towards the end of this year. The wholesale price-based inflation softened to an 11-month low of 12.41 percent in August, even though retail inflation inched up to 7 percent. It said the RBI has already front-loaded its policy rate hikes, tightening by a total of 140 basis points from the start of 2022 to 5.4 percent in August.
“We expect the RBI to continue raising, to 5.9 percent before year-end. The RBI remains focused on reducing inflation but said that 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 in the near future and to remain at 6 percent throughout next year,” Fitch said.
The US-based agency said it expects the rupee value to remain at 79 against the US dollar by the end of 2022, while the retail inflation is at around 6.2 percent. It said supply shocks and inflation are hitting the world economy hard and expects the world GDP to grow by 2.4 percent in 2022 – revised down by 0.5 percentage points.
In 2023, the world GDP will grow by just 1.7 percent, 1 percentage point lower than previous estimates. “The eurozone and UK are now expected to enter recession later this year and the US is expected to suffer a mild recession in mid-2023,” Fitch said.
In China, it said the recovery is constrained by the pandemic restrictions and a prolonged property slump while projecting growth to slow to 2.8 percent this year and recover to only 4.5 percent next year. “We’ve had something of a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp acceleration in interest rate rises, and a deepening property slump in China,” said Brian Coulton, Chief Economist, Fitch Ratings.