New Delhi: Fitch Ratings has lowered India's GDP growth estimate for the current fiscal to 7.5 per cent from 7.8 per cent on average monsoon but said the country is poised to grow at 8 per cent next fiscal on reform push. This comes a day after Reserve Bank revised downwards its real GDP forecast for 2015-16 to 7.4 per cent from earlier expectation of 7.6 per cent, saying growth is expected to pick up in the latter part of the fiscal.
"India takes over as the fastest growing BRIC this year with 7.5 per cent GDP growth, accelerating to 8 per cent in 2016 driven by structural reforms and higher investment," Fitch said in its Global Economic Outlook report. It said the GDP growth in the first (April-June) quarter was "disappointing" as it slowed to 7 per cent from 7.5 per cent in the preceding quarter on moderating private consumption growth and lower net exports.
"Fitch has revised its forecast for Indian real GDP growth for FY16 to 7.5 per cent from 7.8 per cent," it said. Below average rainfall during this year's monsoon season, recorded at 14 per cent below average, is also likely to lower growth somewhat, it said.
Agriculture contributes close to 18 per cent of the India's GDP. Fitch continues to expect an acceleration of growth to 8 per cent for 2016-17 and 2017-18 fiscal years. It said the government is increasing its capital expenditure, although it will likely have to reduce spending closer to the end of the fiscal year to meet the fiscal target.
"The effect of gradual implementation of a number of structural reforms is also expected to contribute to higher growth, even though progress is lacking on big ticket reforms such as the Land Acquisition Amendment Bill and the Goods and Services Tax," Fitch said.
It said monetary policy loosening is also likely to contribute to a pickup in growth, although monetary transmission is limited given relatively weak banking sector health. As regards the China slowdown, Fitch said India would be "less affected" by falling demand, but the increasing risk premium complicates the monetary policy response to the shock. It projected China to grow 6.8 per cent in 2015, 6.3 per cent in 2016 and 5.5 per cent in 2017.
