India’s growth is estimated at 6.3% this fiscal year despite stricter monetary policy and export concerns. Fitch Ratings expects 6.3% and 6.5% growth in the current and future fiscal years.
Fitch Ratings maintained India’s 6.3% growth prediction for the current fiscal year, citing the nation’s economic resilience despite tougher monetary regulations and export issues. The rating agency boosted its year-end inflation projection due to El Nino. Indian economic growth was 7.8% in the April–June quarter of the current fiscal year due to strong services sector demand.
In its September Global Economic Outlook, Fitch said high-frequency indications suggest growth may moderate for July-September. The Reserve Bank of India’s bimonthly consumer confidence poll predicts a dip due to falling exports, sluggish credit growth, and a little increase in consumer pessimism about income and employment.
Fitch noted that transient inflation surges, particularly in the food sector, may limit households’ discretionary spending power in the coming months. It also highlighted fundamental economic factors.
The Reserve Bank of India’s (RBI) 250 basis point interest rate increases during the preceding year may still harm India’s economy, according to Fitch. A bad monsoon season could also make RBI inflation control harder.
Consumer price index retail inflation in India rose to 6.8% in August from 4.9% in June and 7.4% in July. This jump was attributed by Fitch to high tomato prices and other factors.
Despite rising food prices, Fitch maintained its 6.5% RBI benchmark interest rate forecast through 2023. The Indian government has expanded food imports, temporarily abolished wheat import duties, and curtailed sugar exports to address rising food prices.
Fitch observed that the RBI anticipates CPI inflation to decline in the coming months due to temporary vegetable price shocks. El Nino is expected to temporarily affect consumers and the economy, but inflation may surge above estimates. Fitch now expects retail inflation to rise to 5.5% in 2023 from 5%.
Fitch expects the global economy to grow higher in 2023 than in June. However, China’s housing market collapse and US and European restrictive monetary policies are clouding global growth prospects.
The Chinese property industry, once called the “most important sector in the world,” is collapsing. At a time when US and European rate hikes are escalating, Fitch Ratings Chief Economist Brian Coulton says this threatens global growth.
