India’s economy may grow 4.7 per cent in the current financial year, lower than the official estimate of 4.9 per cent, Fitch Ratings said on Friday.
The global rating agency expects the economy to pick up in the next two financial years.
India’s economy is expected to grow 4.7 per cent in FY2013/14, slightly up from the recently downward adjusted 4.5 per cent for FY2012/13, Fitch said in its latest Global Economic Outlook.
India’s Central Statistics Office has estimated GDP growth of 4.9 per cent in this financial year.
The CSO revised the growth rate downward to 4.5 per cent — the lowest in a decade — for the previous financial year from the earlier estimate of 5 per cent on account of subdued performance in agriculture, mining and manufacturing.
Fitch said it cut its real GDP growth forecasts for 2014-15 to 5.5 per cent and for 2015-16 to 6 per cent as investment remains subdued.
“The lower growth forecasts for the coming two years are also based on the premise that monetary policy rates are likely to remain higher for longer in light of the Reserve Bank of India’s stronger resolve to bring down inflation,” it said.
Fitch said the October-December GDP growth of 4.7 per cent was somewhat disappointing as an apparent pick-up in growth in the second quarter of 2013-14 to 4.8 per cent did not materialise in the context of low agricultural growth even after a good monsoon and a record harvest.
“Nonetheless, some high-frequency data point to a recent improvement in activity. Manufacturing PMI rose to a one-year high of 52.5 in February from 51.4 in January and domestic and export orders increased,” it added.
It also said that in the longer run, structurally lower inflation would benefit growth by improving the investment environment.
Inflation, Fitch said, remains high compared with peers, although it came down in recent months. Inflation eased to a nine-month low of 4.68 per cent in February, according to data released.
The agency said global growth will accelerate in 2014 and 2015, driven by a strengthening recovery in major advanced economies, while growth rates will remain broadly flat in emerging markets.
Its latest forecasts for world GDP growth (weighted at market exchange rates) are 2.9 per cent in 2014 and 3.2 per cent in 2015, up from 2.4 per cent in 2013.
Meanwhile, Chairman of Prime Minister’s Economic Advisory Council C Rangarajan said India is likely to grow at 5.5 per cent in the fourth quarter.