Rating agency Fitch scaled down India’s growth forecast for the current fiscal to 6.9 per cent, from the earlier projection of 7.4 per cent.
“Activity should accelerate in the second half of the year, as the impact of one-off events, including the demonetisation shock in late 2016 and the Goods and Services Tax (GST) in July, which have dampened growth in the short-term, are expected to wane,” it said in its Economic Outlook for September.
While noting that economic activity was likely disrupted in the second quarter by firms running down inventory ahead of the implementation of GST, Fitch said that, going ahead, consumption should drive the pick-up in growth.
“Investment is also expected to tick up in the quarters ahead, in part bolstered by ramped-up public sector infrastructure spending,” it further said, while cautioning that the large stock of non-performing loans on bank balance-sheets could dampen the outlook for credit growth and business investment.
Though first quarter GDP growth hit a three-year low of 5.7 per cent, analysts say the Reserve Bank, which announces it monetary policy on Wednesday, is unlikely to cut rates further due to rising inflation.