Global rating agency Fitch on Thursday lowered India’s economic growth forecast for current fiscal year (FY23) to 7 per cent from previous estimate of 7.8 per cent. 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, with next fiscal year also slowing to 6.7 per cent from earlier estimate of 7.4 per cent.
The estimate is lower than the Reserve Bank of India’s (RBI’s) 7.2 per cent for this fiscal year. India’s economy has recovered back to pre-pandemic levels but faces headwinds emerging from a global slowdown, high energy costs and global and domestic monetary tightening.
The agency has also slashed global growth projections citing the European gas crisis, high inflation, and a sharp acceleration in the pace of global monetary policy tightening.
Fitch now expects the GDP of world economy to grow by 2.4 per cent in 2022, revised down by 0.5 percentage points since the June estimates, and by just 1.7 per cent in 2023, a cut of 1 percentage point.
According to a Fitch statement, “The Eurozone and UK are now expected to enter recession later this year and Fitch forecasts that the US will suffer a mild recession in mid-2023.”
Fitch expects the Eurozone economy to contract by 0.1 per cent in 2023, a drop of 2.2 percentage points since June reflecting the impact of the natural gas crisis. It now expects US growth of 1.7 per cent in 2022 and 0.5 per cent in 2023, revised down by 1.2pp and 1pp, respectively.
Meanwhile, China’s recovery is constrained by Covid-19 pandemic restrictions and a prolonged property slump. Fitch expects the Asian economy to grow 2.8 per cent this year and to recover to 4.5 per cent next year, downward revisions of 0.9pp and 0.8pp, respectively.