United States-based credit rating agency Fitch on Friday lowered India’s growth forecast for the current fiscal year to 7.8% from its previous estimate of 8.5% made in March.
The agency cited the impact of inflation for the reduced projection. “The inflationary impacts of the global commodity price shock are dampening some of the positive growth momentum,” the credit rating agency said.
This is the third time this year that the agency has revised its estimate of India’s growth. Previously, it lowered the estimate from 10.3% to 8.5%.
On Friday, Fitch changed India’s sovereign rating to stable from negative, citing the country’s rapid economic recovery.
Sovereign credit rating is an assessment of how creditworthiness of a country. The rating can provide insights into the risk associated with investing in the debt of a particular country.
“The outlook revision reflects our view that downside risks to medium-term growth have diminished due to India’s rapid economic recovery and easing financial sector weaknesses, despite near-term headwinds from the global commodity price shock,” the agency said. “We expect robust growth relative to peers to support credit metrics in line with the current rating.”
The rating agency said that India’s financial sector should facilitate better credit allocation and investment in the coming days.
On Tuesday, the World Bank had also lowered India’s growth forecast for the current fiscal year to 7.5% from its earlier estimate of 8% announced in April.
The financial body had revised India’s projected economic growth to 8% from the previous estimate of 8.7% in January.
The World Bank said that in India rising inflation, supply disruptions and geopolitical tensions are likely to offset the effect of recovery in consumption of services after the Covid-19 lockdowns.
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