Fitch slashes India's FY23 GDP growth forecast to 7%

Fitch said compared to its June forecast of 7.8 per cent growth, it now expects the economy to grow 7 per cent in 2022-23

Global rating agency Fitch on Thursday pared India’s economic growth forecast steeply to 7 per cent for the current financial year 2022-23 from its earlier projection of 7.8 per cent on the back of global growth slowdown, tighter monetary policy in India and high inflation.

It also lowered its economic growth estimate for the next financial year 2023-24 to 6.7 per cent from 7.4 per cent.

"We expect the economy to be slow given the global economic backdrop, elevated inflation and tighter monetary policy," the rating agency said in its global economic outlook.

Fitch said India's central bank has already front loaded its policy rate hikes, tightening by a total of 149 basis points to 5.4 per cent since the start of 2022.

"We expect RBI to continue raising rates to 5.9 per cent before the year end. The RBI remains focused on reducing inflation but said its decision will continue to be calibrated, measured and nimble and dependent on the unfolding dynamics of inflation and economic actiy. We, therefore, expect policy rates to peak in the near future and remain at 6 per cent throughout next year," it said.

It said inflation moderated in August as crude oil prices eased but the risk to food inflation persists, given negative seasonality towards the end of the year.