Fitch slashes India’s FY19 GDP to 7.2%

Fitch slashes India’s FY19 GDP to 7.2%

Mubasher: India’s gross domestic product (GDP) is expected to fall to 7.2% for fiscal year 2018/2019,  Fitch Ratings said in a report on Thursday.

The US-based rating agency forecast an increase in financing cost and a drop in credit availability.

“We now see GDP growth at 7.2% in the fiscal year ending March 2019 (FY19), followed by 7.0% in FY20 and 7.1% in FY21,” the report said.

The report added that the south Asian country’s GDP growth “softened quite substantially” during the period between July and September, as it increased by 7.1%, compared to 8.2% during the previous quarter.

“Consumption was the weak spot, stepping down from 8.6 percent to 7.0 percent, though still growing at a healthy rate. Other components of domestic demand fared well, notably investment,” the agency said.

Moreover, the external sector led India’s GDP down, amid steadily accelerating imports, Fitch said.

The agency noted that India’s fiscal policy should support growth in the run-up to elections in early 2019.

“Stepped-up public investment has helped to stem the downward trend in the investment/GDP ratio, boosted by infrastructure spending. There have also been measures to support rural demand,” Fitch added.

On the other hand, India’s inflation is projected to increase over the coming months on the back of normalising food prices and higher import prices stemming from the depreciation of the rupee (INR).

“The widening of the current account deficit amidst tighter global financing conditions should put downward pressure on the currency, and we forecast the INR to weaken to 75 against the dollar by end-2019,” the report added.