Fitch Ratings on Monday projected Indian economy to grow at a slower pace of 7.4 per cent in the current fiscal and touch 8 per cent growth only in 2018-19, as it expects the benefits of reforms and impact of monetary easing to kick in with a lag. The US-based rating agency projected Reserve Bank of India (RBI) lowering interest rates by 0.25 per cent before end of 2016, followed by another rate cut in 2017.
Fitch Ratings’ latest bi-monthly Global Economic Outlook (GEO) report said “We forecast GDP growth to accelerate gradually from 7.4 per cent in FY17 (year ending March 2017) to 8.0 per cent in FY19.” It projected the growth to be at 7.9 per cent in 2017-18. The Indian economy grew 7.6 per cent last year.
“Public-sector wage hikes, lagged impact of monetary policy easing, and a better monsoon season than the previous two years, should support growth in the near-term, while decent progress on structural reforms – including the recent landmark passage of the Goods and Services Tax in parliament – should facilitate a turnaround in investment over the medium term,” Fitch said.
It said its forecasts imply that India will remain by a wide margin the fastest growing country among Fitch20 economies. GDP growth fell to 7.1 per cent in Q2 from 7.9 per cent Q1. This was lower than the 7.6 per cent estimated in the July Global Economic Outlook (GEO) report. “Persistent investment weakness and soft industrial production suggest the shortfall was not entirely due to short-term volatility in the data,” Fitch said.