Credit ratings agency Fitch Ratings on Friday revised India’s growth forecast for the current fiscal year from 7.4% to 7.8%, PTI reported. The agency, which published its Global Economic Outlook, pointed out that tightening of financial conditions, rising oil bill and weak bank balance sheets may stymie growth.
“We have revised up our forecast for FY 2018-2019 growth to 7.8 per cent from 7.4 per cent on the back of the better-than-expected 2Q18 outturn,” the agency said. “India’s growth likely peaked in 2Q18 [April-June] though.”
The rupee has been the worst performing Asian currency this year, having depreciated nearly 12% this year. “And despite the central bank’s greater tolerance for currency depreciation, interest rates have been raised by more than anticipated,” the report added.
The agency also forecast inflation would rise to the upper part of the Reserve Bank of India’s target band (4%, plus-minus 2%). The wholesale price inflation fell from 5.09% in July to 4.53% in August.
The latest projections come in the backdrop of an expansion in the Gross Domestic Product in the first quarter of 2018-’19. The economy grew at 8.2%, a two-year high, according to the government. Fitch had forecast a growth of 7.7%. “This robust performance was partly attributable to a powerful base effect, with GDP growth dampened in 2Q17 (April-June) by companies de-stocking ahead of the rollout of the goods and services tax,” the agency added.
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