Fitch Ratings expects India to be on the top of the global growth ladder and expanding by 7.7 per cent in the current fiscal, a shade higher than the estimated 7.5 per cent in the previous year due to higher disposable income and a likelihood of a normal monsoon.
"Fitch has maintained its GDP growth forecast for India for the fiscal year ending March 2016 at 7.5 per cent. Growth is expected to gradually accelerate to 7.7 per cent in FY17 and 7.9 per cent in FY18," Fitch Ratings said in its India-Global Economic Outlook (GEO) Forecast.
This implies a minor downward revision from the December GEO, but leaves India at the top of the global growth ladder, it said.
"We expect the gradual recovery in FY17 and FY18 to be supported by higher real disposable income, assuming a normal monsoon after two years of below-average rainfall and a substantial wage increase for central government employees," it said.
The gradual implementation of the structural reform agenda, Fitch Ratings said, is expected to contribute to higher growth, even though progress is lacking so far on big-ticket reforms such as the Land Acquisition Amendment Bill and the Goods and Services Tax.
"Implementation of legislative reforms has so far been difficult, given the government's limited support in the senate (Rajya Sabha), but executive reforms continue to be rolled out."
It said the Budget for FY17 contained some further announcements of reforms, including measures related to the FDI regime, the financial sector and agriculture, illustrating that the government continues to gradually broaden its reform agenda.
Fitch said it expects another 25 bps of monetary policy loosening, facilitated by the government's recent announcement to maintain its fiscal targets for FY17 and FY18.
"We expect the Reserve Bank of India to remain keen to avoid a significant deviation from the glide path to its inflation target, as it is still building a track record for its new monetary policy framework," it added further.