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India GDP growth to be 8% in FY16, 8.3% the next year: Fitch

Says govt's expenditure cuts might have dampened the broader economic pick-up trend

BS Reporter New Delhi
Rating agency Fitch has forecast India’s gross domestic product (GDP) to grow at 8 per cent in 2015-16 and 8.3 per cent in 2016-17, based on the new data series. The forecasts according to the earlier series were 6.5 per cent and 6.8 per cent, respectively.

But the agency cautioned that the cuts in government expenditure for meeting the 2014-15 fiscal deficit target — around Rs 1 lakh-crore lower than the Budget estimates, according to revised estimates — might temporarily have somewhat dampened the broader trend of a pick-up.

While Fitch commended the Central Statistics Office for constructing a GDP data series more in line with international standards, it argued it was difficult to reconcile the revised estimates with other key economic indicators and anecdotal evidence that showed low investment levels, weak corporate balance sheets and a rise in banks’ non-performing assets.

 
The report said policy initiatives, including structural reforms and some fiscal and monetary policy loosening, would have a positive effect on real GDP, though the impact of these measures would likely show with a lag.

On the new monetary policy framework for coordination between the Reserve Bank of India and the central government, which puts in place an inflation-targeting regime, Fitch argued the “stronger focus on inflation is likely to contribute to an environment of structurally lower inflation, while some room for further monetary policy loosening in 2015 is likely”.

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First Published: Mar 21 2015 | 12:36 AM IST

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