Fitch cuts GDP growth forecast to 7.8%

| Updated on: Jul 02, 2015
bl03_fitch table

bl03_fitch table

‘Govt’s new GDP data don’t sync with high NPAs, low investments, weak balance sheets’

With no pick up in capital expenditure, weak rural and export demand, and limited translation of a loose monetary policy into lower bank lending rates, Fitch Ratings has revised its real GDP growth forecast for India.

The global credit rating agency has lowered its real GDP growth forecast to 7.8 per cent in financial year 2016 from 8 per cent, and to 8.1 per cent in FY2017 from 8.3 per cent.

While it continues to expect acceleration in Indian growth, Fitch pointed out that there are some indications that it may be slower than previously expected.

“Downside risks to growth relate, for instance, to below-average rainfall during this year’s monsoon season, although the first three weeks of June recorded 16 per cent above average rainfall,” said Fitch in its Global Economic Outlook.

India’s real GDP growth was 7.3 per cent in the year up to March 2015, just below Fitch’s estimate of 7.4 per cent. Referring to the revised GDP data series, the agency observed that these new GDP growth levels and a pick-up starting in mid-2013 remain difficult to reconcile with indicators that show low investment levels, weak corporate balance sheets and a rise in banks’ bad loans.

Some high-frequency data point to strengthening of demand such as a pick-up in both non-oil/ non-gold imports and domestic vehicle sales in April, Fitch said.

It added that the government’s strong drive to implement structural reforms should also lead to improvements in the business environment and, over time, to a pick-up in investments.

“However, translation of the reforms into higher real GDP growth will depend on the actual implementation. India’s business environment is relatively weak compared with peers and will take time to turn around,” said the Fitch report.

Will surpass China India’s GDP growth, however, will surpass China’s this year for the first time since 1999.

The agency said China is in a gradual structural slowdown.

With the risks relating to below-normal monsoon rains, crude prices and external environment volatility clearly on the Reserve Bank of India’s radar, the window for further rate cuts seems closed for the coming months, said the agency.

Published on January 24, 2018

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