INDIA’S GDP FORECASTS

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Context

Fitch Ratings retained India's economic growth forecast at 7 per cent for the current fiscal.

Fitch Findings on India

Fatsest Growing Economy

India could be one of the fastest-growing emerging markets this year. India is shielded to some extent from global economic shocks given the domestically focFastestused nature of its economy, with consumption and investment making up the bulk of the country's GDP.

Projection cut for next two years

It, however, cut the projections for the next two financial years, stating that even though the country is shielded to some extent from global economic shocks but is not impervious to global developments.

Role of Inflation and Monetary Policy

With regard to India, Fitch said monetary policy tightening and high inflation have also contributed to a slowdown in imports, an easing in personal loan growth and falling purchasing power.

Financial Market Conditions

Tighter financial market conditions are also weighing on demand for capital goods, which serves as a leading indicator for investment.

Economic Resilience

Economic resilience is reflected in upbeat labour market conditions with unemployment easing and labour participation improving.

Inflation

Inflation eased to 6.77 per cent in October though core inflation edged up again after moderating over the summer, and households' inflation expectations remain high as food price inflation remains elevated.

Weakness of Rupee

Weakness in the rupee against the US dollar is adding to inflationary concerns at the RBI given that a third of the CPI basket consist of imports.

Fitch on Global Trends

Fitch now expects the world GDP to grow by 1.4 per cent in 2023, revised down from 1.7 per cent projected in September. China 2023 growth forecast too has been cut to 4.1 per cent, from 4.5 per cent earlier, as prospects for a recovery in housebuilding fade.

World Bank Findings

Separately, the World Bank revised upwards its GDP growth forecast for India to 6.9 per cent for 2022-23, from 6.5 per cent projected in October, saying the economy was showing higher resilience to global shocks.
The Indian economy grew 8.7 per cent in 2021-22 fiscal.

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