Global rating agency Fitch Ratings on Monday slashed India's gross domestic product (GDP) growth forecast to 6.6 per cent for the current fiscal, from 6.8 per cent projected earlier, citing persistent slowdown in manufacturing and agriculture sectors.
The rating agency, however, retained its GDP growth forecast for FY21 and FY22 at 7.1 per cent and 7 per cent, respectively.
"We see growth for FY 2019-2020 printing at 6.6 per cent, before stepping up to 7.1 per cent in FY 2020-2021 and 7.0 per cent in FY 2021-2022," Fitch said in its latest global economic outlook.
The development came amid mounting evidence of slowing economic growth with GDP growth hitting a 5-year low of 6.8 per cent in 2018-19. The lower GDP growth figures were attributed to weaker domestic consumption, slower global growth and tensions between the United States and China.
During the January-March quarter, the GDP growth was recorded at 5.8 per cent due to slow growth in employment generating sectors such as agriculture, manufacturing and construction.
"This is the lowest growth outturn in five years. The slowdown over the past year has been driven by steadily cooling activity in the manufacturing sector and, to a lesser extent, agriculture. Weaker momentum has been mainly domestically driven, though export growth has also faltered more recently," Fitch said in its report.
According to Fitch, the Reserve Bank of India has reduced interest rates by 25 basis points to 5.75 per cent in its June meeting - the third cut so far this year- to address growth concerns. The six-member Monetary Policy Committee (MPC) of the RBI also revised GDP growth projection for the current financial year from 7.2 per cent to 7 per cent.
"We expect another 25 basis point cut later in 2019, which will push the policy repo rate down to 5.50 per cent. Monetary and regulatory easing from the RBI, along with a recovery in portfolio inflows, should support a recovery in credit to the private sector and reverse the drag from the negative credit impulse," Fitch added.
(With PTI inputs)
Edited by Chitranjan Kumar