New Delhi: Fitch Ratings has cut its 2012 growth forecasts for India to 6 percent from 6.5 per cent on deteriorating global growth outlook with diminished willingness or capacity to respond with domestic policy loosening, compared with 2009.
India's economic outlook remains challenging. Investment rose just 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 per cent of GDP in fiscal 2012, leaving little room for fiscal easing," Fitch said in its report.
It feels a number of quarters of weak investment, in turn, may be starting to affect the economy's supply capacity, pointing to a weaker growth outlook. "The 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 said.
This is the third downward revision in India's growth forecast in recent times. Credit Suisse cut India's gross domestic product (GDP) growth forecast for the fiscal year ending in March 2013 to 6 per cent from 6.5 per cent. Earlier, Standard Chartered Bank cut India's economic growth forecast for the current financial year to 5.4 per cent from 6.2 per cent.