Fitch ups In­dia growth fore­cast to 7.4% for FY19

Financial Chronicle - - PLAN, POLICY - FC BUREAU

FITCH Rat­ings on Wed­nes­day raised In­dia's eco­nomic growth fore­cast to 7.4 per cent for 2018-19 but cited higher fi­nance costs and ris­ing oil prices as risks. It also said the ru­pee has been among the worst per­form­ers vis-à-vis Asian cur­ren­cies this year.

The global credit rat­ing agency had ear­lier es­ti­mated the GDP (gross do­mes­tic prod­uct) growth at 7.3 per cent for cur­rent fi­nan­cial year. For 2019-20, it pro­jected the growth at 7.5 per cent.

Fitch fore­cast global oil price to re­main around $70 per bar­rel in 2018, up from $54.9 a bar­rel last year. It said it ex­pects oil price to cool to $65 a bar­rel next year.

“We have re­vised up our fore­cast for 2018-19 growth to 7.4 per cent from 7.3 per cent in March. How­ever, higher fi­nanc­ing costs (stem­ming from mon­e­tary tight­en­ing and higher mar­ket pre­mi­ums) and ris­ing oil prices should limit the up­side to growth,” Fitch said in its global eco­nomic out­look.

The In­dian econ­omy grew at 6.7 per cent in 201718. In the fourth quar­ter (Jan­uary-March) the GDP grew at 7.7 per cent.

Fitch said the In­dian ru­pee has been one of the worst per­form­ing cur­ren­cies in Asia this year, al­though the de­pre­ci­a­tion was more mut- ed than dur­ing the 2013 ta­per-tantrum episode. “In­dia has bet­ter macroe­co­nomic fun­da­men­tals than in 2013 and very low for­eign own­er­ship rates in the do­mes­tic gov­ern­ment bond mar­ket, but the cur­rent ac­count deficit has been widen­ing as a re­sult of ris­ing oil prices, re­viv­ing do­mes­tic de­mand and poor man­u­fac­tur­ing ex­port per­for­mance,” it said.

Last month, US-based Moody’s cut In­dia’s growth fore­cast for 2018-19 to 7.3 per cent from 7.5 per cent cit­ing ris­ing oil prices.

Fitch said in­fla­tion has picked up since mid-2017, de­spite food in­fla­tion be­ing muted. “The rise in the oil price and the ru­pee de­pre­ci­a­tion should add to price pres­sure in the com­ing months, al­though we ex­pect in­fla­tion to be con­tained within the up­per band of the RBI’s tar­get range,” it said.

Fitch pro­jected retail in­fla­tion to be 5 per cent by the end of 2018. RBI ear­lier this week hiked its pol­icy rate by 0.25 per cent, cit­ing in­fla­tion risks.

Fitch re­tained the global growth fore­cast at 3.3 per cent in 2018 and 3.2 per cent for 2019, re­flect­ing the dis­ap­point­ment over dis­tri­bu­tion of growth, with short­falls in a num­ber of smaller economies. It said ex­pan­sion will be on-track or slightly bet­ter in the world’s two largest economies – the US and China.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.