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  1. Fitch bets bigger on India; raises GDP growth forecast for FY19 after stellar Q4 performance

Fitch bets bigger on India; raises GDP growth forecast for FY19 after stellar Q4 performance

Rating agency Fitch today raised its GDP growth forecast for both financial year 2018-19 and 2019-20 to 7.4% and 7.5% respectively.

By: | Updated: June 13, 2018 5:27 PM
Fitch bets bigger on India; raises GDP forecast for both FY19, FY20 after stellar Q4 performance Fitch bets bigger on India; raises GDP forecast for both FY19, FY20 after stellar Q4 performance. (Image: Reuters)

Rating agency Fitch today raised its GDP growth forecast for the financial year 2018-19 to 7.4% and retained it at 7.5% for 2019-20. The revised GDP growth forecast follows India’s unexpected growth performance in the fourth quarter of the fiscal year 2017-18, which was a whopping 7.7%. Last month, Fitch had refused to upgrade India’s sovereign rating citing high fiscal deficit and banking crisis.

“We have revised up our forecast for 2018-19 growth to 7.4 per cent from 7.3 per cent in March. However, higher financing costs (stemming from monetary tightening and higher market premiums) and rising oil prices should limit the upside to growth,” Fitch said in its Global Economic Outlook. The economy grew at 6.7% in 2017-18 and 7.7% in the January-March quarter. Fitch said the Indian rupee has been one of the worst performing currencies in Asia this year, although the depreciation was more muted than during the 2013 taper-tantrum episode, PTI reported.

“India has better macroeconomic fundamentals than in 2013 and very low foreign ownership rates in the domestic government bond market, but the current account deficit has been widening as a result of rising oil prices, reviving domestic demand and poor manufacturing export performance,” it said. Last month, US-based Moody’s cut India’s growth forecast for 2018-19 to 7.3 per cent from 7.5 per cent citing rising oil prices.

Fitch also said the near-term global growth prospects remain robust despite rising trade tensions and political risks.
“Global trade tensions have risen significantly this year, but at this stage the scale of tariffs imposed remains too small to materially affect the global growth outlook. “A major escalation that entailed blanket across-the-board geographical tariffs on all trade flows between several major countries would be much more damaging,” says Brian Coulton, Fitch’s Chief Economist.

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