Global rating agency, Fitch Ratings has raised India’s growth forecast for FY19 to 7.8 per cent from 7.4 per cent earlier. The upward revision in growth forecast for current fiscal comes in the backdrop of GDP expanding 8.2 per cent in April-June quarter, higher than Fitch’s expectation of 7.7 per cent. This robust performance was partly attributable to a powerful base effect, with GDP growth dampened in April-June quarter of 2017 by companies de-stocking ahead of the rollout of the goods and services tax. Growth forecast for 2019-20 and 2020-21 fiscals, however, have been cut by 0.2 percentage points to 7.3 per cent.
However the rating agency, in its Global Economic Outlook, has highlighted rising oil bill and higher interest rates as key concerns. It expects inflation to rise to the upper end of the central bank’s target band (4 per cent, plus-minus 2 per cent) on relatively high demand-pull pressures and rupee depreciation. Fitch said the Indian rupee has been the worst-performing major Asian currency so far this year.
Further, the rating agency said that the fiscal policy should remain quite supportive of growth in the run-up to elections likely to be held in early 2019. The investment/GDP ratio has stopped trending down, helped by ramped-up public infrastructure outlays, in particular by state-owned enterprises (SOEs).
