Fitch slashes India's growth forecast to 7% on the back of global slowdown

Fitch Ratings on Thursday trimmed India’s GDP growth forecast on the back of a global slowdown and tighter monetary policy.

The agency sees India growing at 7% in FY23 compared with 7.8% in its earlier projection. The estimates for FY24 have also been cut to 6.7% against 7.4% earlier. Further estimates for 2023-24 have also been cut to 6.7%

The RBI expects the economy to grow 7.2% in the current fiscal year.


The ratings agency said inflation moderated in August as crude oil prices eased but the risk to food inflation persists given negative seasonality towards the end of this year.

The wholesale-price based inflation softened to 11-month low of 12.41% in August, even though retail inflation inched up to 7%.

“We expect the RBI to continue raising, to 5.9 per cent before year-end. The RBI remains focused on reducing inflation, but said that its decisions would continue to be “calibrated, measured and nimble” and dependent on the unfolding dynamics of inflation and economic activity. We therefore expect policy rates to peak in the near future and to remain at 6 per cent throughout next year,” Fitch said.

Crises in Europe - including war and inflation - as well as looming recession fears have caused the agency to cut global forecasts, including India's.

Current expectations show global GDP growth at 2.4% in 2022 - down by 0.5 percentage points - and at 1.7% in 2023 - down one percentage point.

"We've had something of a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp acceleration in interest rate hikes and a deepening property slump in China," said Brian Coulton, Chief Economist at Fitch.

To add to the crisis, Europe and the United Kingdom are expected to enter a period of recession later this year, while the United States could see one in mid-2023.

In the US, growth is seen at 1.7% in 2022 and 0.5% in 2023.

"China's recovery is constrained by Covid-19 pandemic restrictions and a prolonged property slump, and we now expect growth to be 2.8% this year and to recover to 4.5% next year," the agency said in a statement.

With inputs from PTI