Government may find difficult to meet 3.3% deficit target, India’s growth to fall to 7.3% in FY20, says Fitch

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Published: November 15, 2018 6:02:38 PM

India's real GDP growth is expected to be at 7.8 percent in FY19, up from 6.7 percent in FY18 even as the government may find it tough to meet its fiscal deficit target of 3.3 percent, Fitch said.

India’s rating has also been kept unchanged at ‘BBB-‘, the lowest investment grade with a stable outlook by the rating agency.

India’s real GDP growth is expected to be at 7.8 percent in FY19, up from 6.7 percent in FY18 even as the government may find it tough to meet its fiscal deficit target of 3.3 percent, Fitch said. India’s rating has also been kept unchanged at ‘BBB-‘, the lowest investment grade with a stable outlook by the rating agency. There are several downside risks to India’s GDP growth forecast in the current fiscal and ‘significant’ risks to India’s macroeconomic outlook, it added.

However, India’s growth is expected to decelerate to 7.3 percent in FY20 and FY21 due to risks from tightening financial conditions, high oil prices, it added. Fitch also said that medium-term growth outlook of India is strong.

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Weak fiscal position continues to constrain India’s sovereign ratings but India is more resilient to external shocks than many peers, the rating agency also said. India’s current account deficit is expected to stand at 3 percent of GDP in FY19 and 3.1 percent in FY20, Fitch said. The rating agency also said that the Indian banks are not in a position to significantly spur loan growth.

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