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NEW DELHI : Fitch Ratings on Wednesday cut economic growth projections for India marginally to 8.4 per cent for the current financial year from earlier forecast of 8.7 per cent due to a slowdown in rebound of the economy post the second Covid wave. 

The agency, however, remained bullish on the India’s growth prospect for next financial year (FY23) raising the projection 10.3 per cent from earlier forecast of 10 per cent. 

We have cut our FY22 (financial year ending March 2022) GDP growth forecast, to 8.4 per cent (-0.3pp). GDP growth momentum should peak in FY23, at 10.3 per cent (+0.2pp), boosted by a consumer-led recovery and the easing of supply disruptions," Fitch said in its Global Economic Outlook (GEO) report.  

Faced with the pandemic and lockdowns in several parts of the country, India’s economic activity has plummeted last year with GDP contracting by 7.3 per cent in FY21. The growth this year so far has been in the positive zone with GDP picking up pace growing by 8.4 per cent in second quarter of FY22 against 7.4 per cent contraction in same period of last year. 

Fitch said that though India’s GDP has grown sharply this year so far, the bounce has been subdued than expected with the services sector continuing show weakness. 

The country’s mobility data pointed towards an uptick in economic activities with growth picking up pace in fourth quarter of FY21 and manufacturing is also expected to pick up pace as supply constraints are eased.  

In its GEO report, Fitch also said that it expected the performance of service sector improve with the lifting of remaining restrictions.  

While remaining largely positive about the prospects, Fitch said risks remained for the economy in the near term from the pandemic as less than a third of country’s remain fully vaccinated while the newly discovered Omicron variant added to risks. 

The ratings agency blamed India’s high inflation numbers on domestic factors. But said that India has seen its food inflation fall in contrast to several emerging markets. 

“We expect headline inflation to average 4.9 per cent in 2022 and 4.2 per cent in 2023, from 5 per cent in 2021, amid moderate food inflation," the rating agency said. 

The agency expected the RBI to start raising interest rates in 2022, by 75 basis points, beginning in 2Q22. The RBI, monetary policy committee on Wednesday decided to maintain accommodative stance keeping the policy rates unchanged.

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