Fitch lowers India growth forecast to 6%

Written by fe Bureau | New Delhi | Updated: Sep 29 2012, 09:52am hrs
Close on the heels of Standard & Poors projecting a gloomy outlook, Fitch Ratings on Friday lowered Indias growth forecast by half a percentage point to 6%, saying a bloated fiscal deficit coupled with high inflation will prevent authorities to stimulate the slowing economy.

Fitch Ratings projection is still better than S&Ps forecast of 5.5%, but way lower than Reserve Bank of Indias estimate of 6.5% and finance ministrys 7.6%.

Volatile political environment pose risks in implementing some of the recently announced reforms like FDI in multi-brand retail, Fitch said referring to nationwide protests by the Opposition and some of lending outside support to the UPA government.

While the benefits from FDI in retail, aviation and other sectors are unlikely to percolate in near term, Fitch said a number of quarters of weak investment, in turn, may be starting to affect the economys supply capacity, pointing to a weaker growth outlook.

The authorities ability to respond with looser policy is constrained by Indias high inflation, fiscal deficit and public debt, Fitch said.

Fitch projects Indias general government deficit or the combined deficit of centre and states taken together at 8.5% of GDP during 2012-13. On thursday, the government kept its gross market borrowing target unchanged at R5.7 lakh crore for the current fiscal year, indicating that it was serious in capping the fiscal deficit close to the budget target of 5.1% of GDP compared to 5.8% last year.