Fitch ups In­dia’s growth fore­cast to 7.4% for FY’19

■ The global rat­ing agency had ear­lier es­ti­mated the GDP growth at 7.3 per cent for cur­rent fi­nan­cial year and for 2019-20, it pro­jected growth at 7.5 per cent

The Hitavada - - BUSINESS -

FITCH Rat­ings on Wed­nes­day raised In­dia’s eco­nomic growth fore­cast to 7.4 per cent for 201819 but cited higher fi­nance costs and ris­ing oil prices as risks. It also said that the ru­pee had been among the worst per­form­ers visa-vis Asian cur­ren­cies this year.

The global credit rat­ing agency had ear­lier es­ti­mated the GDP growth at 7.3 per cent for the cur­rent fi­nan­cial year. For 2019-20, it pro­jected the growth at 7.5 per cent. Fitch fore­cast global oil prices to re­main around USD 70 per bar­rel in 2018, up from USD 54.9 a bar­rel last year. It said it ex­pected oil prices to cool to USD 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 pc in 201718. In fourth quar­ter (Jan­uary-March), GDP grew at 7.7 per cent.

Fitch said the Indian ru­pee had been one of the worst per­form­ing cur­ren­cies in Asia this year, al­though the de­pre­ci­a­tion was more muted 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 had picked up since mid-2017, de­spite food in­fla­tion be­ing muted. “The rise in oil price and INR de­pre­ci­a­tion should add to price pres­sure in the com­ing months, al­though we ex­pect in­fla­tion to be con­tained within the up­per band of RBI’s tar­get range.” Fitch pro­jected the re­tail in­fla­tion to be 5 per cent by the end of 2018.

The RBI ear­lier this week hiked pol­icy rate by 0.25 pc, cit­ing in­fla­tion risks. Fitch re­tained global growth fore­cast at 3.3 pc in 2018 and 3.2 pc for 2019, re­flect­ing dis­ap­point­ment over dis­tri­bu­tion of growth, with short­falls in a num­ber of smaller economies.

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