Fitch Ratings has lowered the GDP forecasts for all major economies and has also slashed India’s rise to 7% for 2022-23.
India‘s GDP growth projection for FY23 was lowered by Fitch Ratings on Thursday to just 7%, citing the predicted slowdown in the economy due to the state of the global economy, rising inflation, and high-interest rates.
It had predicted 7.8% growth for India in June.
In the September edition of the Global Economic Outlook, Fitch said, “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.”
According to Fitch’s Global Economic Outlook, the world’s growth for the current year is anticipated to be 2.4% less than the earlier forecast of 2.9%.
Fitch anticipates India’s growth to decline further
Fitch anticipates India’s growth to decline further to 6.7% from the previously anticipated 7.4% in 2023–2024, down from the before estimated 7.8% in 2022–2023.
“The eurozone and UK are now expected to enter the recession later this year and Fitch forecasts that the US will suffer a mild recession in mid-2023,” Fitch continued in the issue of the Global Outlook.
They pointed out that India’s 12 percent growth in April to June quarter was below the expected 18 percent rise. “Seasonally adjusted estimates show a 3.3 percent quarter on the quarter decline though this seems to be at odds with high-frequency indicators.”
However, it noted that industrial growth and Purchasing Manager Indices had improved during the quarter. “The manufacturing PMI index also recovered strongly in Julyan remained upbeat in August, with the Reserve Bank of India (RBI) saying that “domestic activity remains resilient. Nevertheless, we expect the economy to slow down given the global economic backdrop, elevated inflation, and tighter monetary policy.”
Core inflation, which excludes food, fuel, and light, remained elevated at 6%
The firm has issued a warning that despite India recording a minor increase in August, there is still a possibility of food inflation.
“Core inflation, which excludes food, fuel, and light, remained elevated at 6% while inflation expectations have also stayed high. The RBI’s latest survey of household inflation expectations in July, but expectations are still far above pre-pandemic levels.”
“Destabilising inflation expectations could risk triggering second-round effects, according to the minutes of the RBI”s August policy meeting. While the RBI expects monthly inflation data to be volatile in the near term, its expectation is for the consumer price inflation to ease towards the end of the year.”