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Two weeks after Moody's slashed India's GDP growth forecast, Fitch Ratings has also reduced its projection from 7.8% to 7% for the current year.
Fitch Ratings is a credit rating agency that was formed in 1913. It is one of the world's top 3 ratings agencies alongside Moody's and Standard & Poor's (S&P). The firm provides forward-looking credit opinions which represent the likelihood of default. Its ratings are used by investors, intermediaries (like investment banks), issuers of debt, businesses, and corporations.
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Earlier, Fitch had projected India's economy to grow 7.8% in the current year. However, it has currently slashed its own projection to 7% for FY23, as opposed to RBI's 7.2% projection. Moreover, estimates for FY24 have also been downgraded to 6.7% from 7.4%.
“We expect the economy to slow given the global economic backdrop, elevated inflation, and tighter monetary policy. Inflation moderated in August as crude oil prices eased, but the risk to food inflation persists given negative seasonality towards the end of this year," the agency said.
Indian WPI had eased to 12.4% in August 2022. However, food inflation and retail inflation surged to 12.37% and 7% respectively during the month. Rising food prices and a record heatwave are some of the main reasons for the rising inflation.
However, the rating agency's views were not limited to our country. In its Global Economic Outlook (GEO) report, the agency said that the UK and Eurozone will be entering a recessionary phase by the end of this year, followed by a mild version in the US in 2023. The European gas crisis, rising inflation, and the tightening of monetary policies are causing a decline in economic prospects.
Article by Aman Agarwal.
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