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Fitch retains India’s GDP forecast at 7%, cuts outlook for next 2 years

Fitch said India is expected to record one of the fastest growth rates among emerging markets in our Fitch20 coverage this year.

fitch ratingsPedestrians walk past the logo for Fitch Ratings Ltd. outside their offices in New York. (Bloomberg/File photo)

Fitch Ratings on Tuesday increased India’s growth forecast to 7.0 per cent in the financial year ending March 2023 given the stronger-than-expected outturn in the ongoing fiscal year.

“The economy grew more than expected in Q3 of FY22, increasing 6.3 per cent year-on-year (non-seasonally adjusted) owing to a large boost from consumption and investment, and above our September Global Economic Outlook (GEO) forecast of 5.5 per cent,” it said. US rating agency Moody’s Investors Services recently slashed India’s real GDP growth projections again to 7.0 per cent for 2022 from 7.7 per cent.

Fitch said India is expected to record one of the fastest growth rates among emerging markets in our Fitch20 coverage this year. “India is shielded to some extent from global economic shocks given the domestically focused nature of its economy, with consumption and investment making up the bulk of the country’s GDP. However, India is not impervious to global developments,” the rating firm said.

“The worldwide economic slowdown is expected to reduce demand for Indian exports and weakness is already evident in recent data – merchandise exports declined for the first time in almost two years including in textiles, petroleum products and engineering goods,” Fitch said.

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According to Fitch, monetary policy tightening and high inflation have also contributed to a slowdown in imports, an easing in personal loan growth and falling purchasing power. “Tighter financial market conditions are also weighing on demand for capital goods, which serves as a leading indicator for investment. That said, economic resilience is reflected in upbeat labour market conditions with unemployment easing and labour participation improving,” it said.

The employment sub-index of the manufacturing PMI also accelerated in October to an almost three-year high while the services sector equivalent remained in expansion, it said. Inflation eased to 6.77 per cent in October though core inflation edged up again after moderating over the summer, and households’ inflation expectations remain high as food price inflation remains elevated. Weakness in the rupee against the US dollar is adding to inflationary concerns at the RBI given that a third of the CPI basket consists of imports, Fitch said.

The RBI has raised rates by a cumulative 190 bps since the start of the tightening cycle in April 2022, lagging behind the Fed’s 350 bps increases over the same period. The RBI has already intervened to support the rupee and further rate rises are likely to support the currency and to curtail underlying inflationary pressure. “We now expect the RBI to increase policy rates to 6.15 per cent by December and to then hold this rate throughout 2023,” it said.


Fitch Ratings has again lowered its world GDP forecasts for 2023 as central banks are forced to toughen up in their fight against inflation and China’s property market outlook deteriorates.

Fitch now expects world GDP to grow by 1.4 per cent in 2023, revised down from 1.7 per cent in the September Global Economic Outlook (GEO). Fitch has lowered its 2023 growth forecasts both for the US to 0.2 per cent, from 0.5 per cent – as monetary policy is tightened more rapidly – and also China, to 4.1 per cent from 4.5 per cent. We have raised our eurozone growth to 0.2 per cent from -0.1 per cent. The EU gas crisis has eased a little, but sharper ECB rate rises will weigh on demand.

First published on: 06-12-2022 at 16:58 IST
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