London: Global rating agency Fitch Ratings has cut the forecast for India's gross domestic product (GDP) growth to 6.6 per cent for the current fiscal 2019-20, from 6.8 per cent projected three months ago, largely due to a persistent slowdown in manufacturing and agriculture sectors.
However, it retained the GDP growth forecast for the next two years at 7.1 per cent and 7 per cent. "We see growth for FY 2019-2020 printing at 6.6 per cent, before stepping up to 7.1 per cent in FY 2020-2021 and 7.0 per cent in FY 2021-2022," Fitch said in its latest global economic outlook.
"The slowdown over the past year has been driven by steadily cooling activity in the manufacturing sector and, to a lesser extent, agriculture. Weaker momentum has been mainly domestically driven, though export growth has also faltered more recently," said Fitch.
The development came amid mounting evidence of slowing economic growth with GDP growth hitting a five-year low of 6.8 per cent in 2018-19. The lower GDP growth figures were attributed to weaker domestic consumption, slower global growth and tensions between the United States and China.
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During the January-March quarter, the GDP growth was recorded at 5.8 per cent due to slow growth in employment generating sectors such as agriculture, manufacturing and construction.
According to Fitch, the Reserve Bank of India (RBI) has reduced interest rates by 25 basis points to 5.75 per cent in its June meeting -- the third cut so far this year -- to address growth concerns.
The six-member Monetary Policy Committee of the RBI also revised GDP growth projection for the current financial year from 7.2 per cent to 7 per cent.
"We expect another 25 basis point cut later in 2019, which will push the policy repo rate down to 5.50 per cent. Monetary and regulatory easing from the RBI, along with a recovery in portfolio inflows, should support a recovery in credit to the private sector and reverse the drag from the negative credit impulse," Fitch added.
On a global level, it said the trade war is weighing on investment prospects and has sharply increased downside risks to world economic growth forecasts.
World growth is expected to fall to 2.8 per cent this year from 3.2 per cent in 2018. This forecast is unchanged from the March 2019 global economic outlook. Fitch revised the forecast for world growth in 2020 down to 2.7 per cent from 2.8 per cent in the last outlook.
