India’s economic growth rate is expected to accelerate to 7.7 per cent in the current fiscal, Fitch said on Monday while affirming India’s sovereign ratings at ‘BBB-’ with a stable outlook. The global rating agency also raised various concerns, including weak private investment and monetary policy transmission.

“The affirmation of India’s sovereign ratings balances a strong medium-term growth outlook and favourable external balances against a weak fiscal position and still-difficult business environment.

“However, the latter is likely to gradually improve with implementation and continued broadening of the government’s structural reform agenda,” it said in a statement.

Fitch said India exhibits one of the highest real GDP growth rates in the sovereigns space.

Its five-year average growth is among the 10 highest of all rated sovereigns, and the 7.6 per cent real GDP growth in the financial year ended March 2016 exceeds the ‘BBB’ category median of 3.3 per cent.

“Fitch forecasts real GDP growth to slightly accelerate to 7.7 per cent in FY17 and 7.9 per cent in FY18, resulting from an expected pick-up in consumption in both urban and rural areas after a civil servant wage hike of 24 per cent, and the strong likelihood of stronger rainfall than in the previous two poor monsoon years,” the rating agency said.

Referring to the cumulative policy rate cuts of 150 bps by the RBI since January 2015, Fitch said that “may also contribute to growth”, even though weak bank balance sheets continue to impair monetary transmission.

Fitch also expects the Centre’s continued structural reform push to support growth in the medium term.

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