India's GDP to grow at 7.3 per cent next fiscal, 7.5 per cent in FY 2019-20: Fitch

US-based Fitch Ratings on Thursday pegged India's GDP growth at 7.3 per cent for FY 2018-19 and 7.5 per cent for FY 2019-20. The agency in its Global Economic Outlook report said that Indian economy would clock a growth rate of 6.5 per cent this fiscal, a bit lower than the CSO's 6.6 per cent estimate.

Highlighting the factors that could propel the growth, the agency in its report noted that 'the influence of one-off policy-related factor which was dragging growth has now waned.' It also observed that the money supply - which choked economic activities in formal and informal sectors after demonetisation - recovered to its pre-demonetisation level in mid-2017 and is now increasing steadily.

The Indian economy in the October-December quarter recorded a growth of 7.2 per cent, highest in last five quarters.

Fitch said that the Budget 2018 should support a near-term growth outlook. "It contains measures that will benefit low-income earners (such as a minimum price support and free health insurance) and support rural demand. The government also plans to ramp up infrastructure outlays, in particular by state-owned enterprises," the agency said.

On inflation, Fitch said that accelerating food prices were the main cause of the pick-up in headline inflation. "By contrast, fuel price increases have been contained by the government's decision to roll back excise duties to keep pump prices stable in the face of rising oil prices. We expect inflation to hover a bit below 5 per cent in 2018 and 2019, in the upper band of the Reserve Bank's target," it said.

Fitch's forecast has come just a day after the World Bank projected a similar growth in next fiscal. On Wednesday, the World Bank released its India Development Update in which it said: "The GDP growth is projected to reach 6.7 per cent in 2017-18 and accelerate to 7.3 per cent and 7.5 per cent in 2018-19 and 2019-20 respectively." It further said that India's growth has been credible over the long run with growth averaging at 7 per cent in the last decade.

The World Bank in its report pointed to two major factors that dragged the Indian economy in the last couple of quarters. It said: "India's GDP growth saw a temporary dip in the last two quarters of 2016-17 and the first quarter of 2017-18 due to demonetisation and disruptions surrounding the initial implementation of GST (Goods and Services Tax)." However, industrial activity is poised to grow, with manufacturing expected to accelerate following the implementation of GST, it said.

"The Indian economy is likely to recover from the impact of demonetisation and the GST, and growth should revert slowly to a level consistent with its proximate factors -- that is, to about 7.5 per cent a year," the World Bank report had said.

(With inputs from PTI)