Fitch Ratings lowers India's FY19 growth forecast to 7.2%

"We have lowered our growth forecasts on weaker-than-expected momentum in the data, higher financing costs and reduced credit availability," the agency said in its Global Economic Outlook for December.

"We now see GDP growth at 7.2 per cent in the fiscal year ending March 2019 (FY19), followed by 7 per cent in FY20 and 7.1 per cent in FY21.", Image source: Pixabay

Global ratings agency Fitch Ratings on Thursday lowered India`s growth forecasts to 7.2 per cent from an earlier projection of 7.8 per cent rise for fiscal year ending March 2019.

"We have lowered our growth forecasts on weaker-than-expected momentum in the data, higher financing costs and reduced credit availability," the agency said in its Global Economic Outlook for December.

"We now see GDP growth at 7.2 per cent in the fiscal year ending March 2019 (FY19), followed by 7 per cent in FY20 and 7.1 per cent in FY21."

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Last week, official data showed that India`s GDP growth softened substantially during the second quarter of 2018-19 to 7.1 per cent from a rise of 8.2 per cent in the previous quarter.

According to the outlook report, the country`s banking sector is still struggling with a high proportion of non-performing assets, while non-banking financial institutions (NBFIs) are facing tighter access to liquidity following the default of IL&FS, one of the 30 biggest NBFIs in India.

However, the report said that fiscal policy should continue to support growth in the run-up to elections in early 2019.

"Stepped-up public investment has helped to stem the downward trend in the investment/GDP ratio, boosted by infrastructure spending. There have also been measures to support rural demand," the report said.

On the inflation trend, the outlook said that headline inflation has slipped in recent months, and touched a 13-month low in October, at 3.3 per cent year-on-year.

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"Food prices have pulled the headline index down, but core inflation remains elevated. We expect inflation to edge up mildly in the coming months, on normalising food prices and higher import prices stemming from the depreciation of the rupee (INR)," the report said.

"The widening of the current account deficit amidst tighter global financing conditions should put downward pressure on the currency, and we forecast the INR to weaken to 75 against the dollar by end-2019."

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