Fitch Ratings has revised down its real GDP growth forecast for India to 7 per cent in FY 12 and 7.5 per cent for FY13, from 7.5 per cent and 8 per cent previously. The FY14 GDP growth forecast has also been revised down to 8 per cent from 8.5 per cent previously.
In its latest Global Economic Outlook, Fitch said the Indian economy is likely to remain weighed down by a combination of the weaker global economy and higher domestic interest rates.
“India has already experienced a sharp slowdown this year and is expected to regain some of the lost momentum by 2013,’’ the report said.
However, despite the economic slowdown, inflation pressures remain. The headline wholesale price index (WPI) rose 9.7 per cent year-on-year in October and grew by an average of 9.5 per cent y-o-y in the previous 12 months.
“Although the combination of slower economic growth and higher interest rates could eventually reduce demand driven pressure (as evident from 5.1 per cent y-o-y contraction in index of industrial production in October 2011), supply-side pressures may not ease so quickly,’’ Fitch said.
The recent weakening in the rupee, which has fallen roughly 15 per cent in the past three months, coupled with elevated commodity prices, notably oil, suggests that it will take time before headline WPI displays significant improvement, the report said.