Fitch lowers India’s GDP growth forecast for 2022-23 to 7.8 per cent

New Delhi [India], June 10 (ANI): Fitch Ratings on Friday lowered India's gross domestic product (GDP) growth forecast for the financial year 2022-23 to 7.8 per cent from its earlier projection of 8.5 per cent announced in March, citing inflationary impacts of the global commodity price shock.
India's economy continues to see a solid recovery from the COVID-19 pandemic shock. GDP recovered by 8.7 per cent in the fiscal year ended March 2022, and we forecast GDP growth to remain robust at 7.8 per cent in FY23 compared with the 3.4 per cent 'BBB' median, Fitch Ratings said in its rating action commentary on India's Long-Term Foreign-Currency Issuer Default Rating (IDR).
"However, this is a downward revision from our 8.5 per cent forecast in March as the inflationary impacts of the global commodity price shock are dampening some of the positive growth momentum," the global ratings agency said.
However, citing diminished downside risks to medium-term growth, Fitch Ratings upgraded its outlook on India's long-term foreign currency Issuer Default Rating (IDR) to "Stable" from "Negative". The rating agency has also affirmed India's Issuer Default Rating (IDR) at 'BBB-'.
Fitch Ratings has pegged India's inflation for the financial year 2022-23 at 6.9 per cent.
"We expect inflation to remain elevated in FY23 at 6.9 per cent (BBB median: 4.9 per cent), due to the sharp rise in global commodity prices and underlying demand pressures," the rating agency said.
The Reserve Bank of India (RBI) lifted its policy repo rate by 90bp to 4.90 per cent in just over a month, signalling its growing concerns that inflation could exceed its 2 to 6 per cent target band for a sustained period.
"We forecast the RBI to continue to withdraw liquidity and raise rates, with the repo rate reaching 6.15 per cent by FY24," it said.
Fitch Ratings said India's external risks remain relatively well-contained, despite the sharp rise in oil prices.
We forecast the current account deficit to rise to 3.1 per cent of GDP in FY23 from 1.5 per cent in FY22 on the back of a higher oil import bill, while resilient exports mitigate the deterioration, it said.
Large foreign-exchange buffers, which reached $607 billion by FYE22 (9.0 months of imports), will help the country manage financial market volatility emanating from global monetary-policy tightening. We forecast reserves to moderate somewhat to $563 billion by FYE23 (7.5 months of imports), the rating agency said.
"We forecast growth of around 7 per cent between FY24 and FY27, underpinned by the government's infrastructure push, reform agenda and easing pressures in the financial sector. Nevertheless, there are challenges to this forecast, given the uneven nature of the economic recovery and implementation risks for infrastructure spending and reforms," Fitch Ratings said. (ANI)