NEW DELHI: Citing deteriorating global growth outlook and loosening domestic policy, Fitch Ratings has reduced its 2012 growth forecast for India to 6 per cent from 6.5 per cent.
India's economic outlook remains challenging. Investment increased merely 0.7 per cent YoY in second quarter of 2012, with higher-frequency indicators pointing to another weak outturn in Q3.
“Ongoing concerns over government economic and investment policy may be weighing on business confidence. The authorities' ability to respond with looser policy is constrained by India's high inflation, fiscal deficit and public debt. Fitch projects India's general government deficit at 8.5% of GDP in fiscal 2012, leaving little room for fiscal easing,” as mentioned by Fitch in its report.
“The government authorities have announced a range of reforms in September 2012 including liberalisation of FDI in multi-brand retail, which may help to restore confidence and lift investment, although the volatile political environment points to implementation risk,” the rating agency added.
In the recent times, this is the third downward revision in India's growth forecast. Credit Suisse cut India's gross domestic product (GDP) growth forecast for the fiscal year ending in March 2013 to 6 percent from 6.5 percent.
Earlier, Standard Chartered Bank slashed India's economic growth forecast for the current financial year to 5.4 percent from 6.2 percent.