Fitch slashes India's GDP outlook to 6.7%, says growth has 'repeatedly disappointed' in recent quarters

 BusinessToday.in   New Delhi     Last Updated: December 5, 2017  | 09:05 IST
Fitch slashes India's GDP outlook to 6.7%, says growth has 'repeatedly disappointed' in recent quarters

Unlike its earlier projection of 6.9 per cent growth, credit rating agency Fitch on Monday cut India's GDP forecast for the current fiscal to 6.7 per cent. The agency cited weaker rebound as a reason behind the growth rate cut. India has been on a rollercoaster ride in terms of credit ratings and GDP numbers, with credit rating agencies assessing India based on the recent economic decisions taken up by the Narendra Modi government. Days after Moody's upgraded India's credit rating to Baa2 from Baa3, another US-based credit rating agency, S&P, left it unchanged. The New York-based credit rating agency reaffirmed a stable outlook for India. India also received positive news when the recent GDP growth numbers reversed a five-quarter slowdown and jumped to 6.3 per cent. The International Monetary Fund (IMF) had also said it will update its growth rate forecast for India in January next year. Fitch, however, said it expects the GDP growth to pick up in the next two years.

"The Indian economy picked up in 3Q17 (July-September), with GDP growing by 6.3 per cent year-on-year, up from 5.7 per cent in 2Q17. However, the rebound was weaker than we expected, and we have reduced our growth forecast for the fiscal year to end- March 2018 (FY18) to 6.7 per cent from 6.9 per cent in the September GEO," Fitch said in its latest GEO.

The US-based ratings agency said growth has "repeatedly disappointed" in recent quarters, partly because of one-off factors including the demonetisation programme of November 2016 and disruptions related to the implementation of the Goods and Services Tax (GST) in July 2017. Reversing a five-quarter slide in GDP growth, Indian economy bounced back from a three-year low to expand by 6.3 per cent in July-September as manufacturing revved up and businesses adjusted to the new GST tax regime. The GDP growth in the second quarter of 2017-18 compares to 5.7 per cent in April-June, the lowest growth rate since the Narendra Modi government took office, and 7.5 per cent in the September quarter of the previous fiscal.

Stating that it expects GDP growth to pick up in the next two years, Fitch said gradual implementation of the structural reform agenda is expected to contribute to higher growth, as will higher real disposable income. "Recent moves by the government should help support the growth outlook and enhance business confidence," it said. The two-year bank recapitalisation plan of Rs 2.1 lakh crore, or 1.4 per cent of GDP, is likely to help address the capital shortages that have hindered the banks' lending capacity. Also, the Rs 6.9 lakh crore, or 4.5 per cent of GDP, road construction plan may encourage the investment growth outlook.

With PTI inputs

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