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
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.