Fitch Ratings revises India's growth estimate to 12.8% for the next fiscal

American credit rating agency Fitch has revised India's GDP growth estimate to 12.8 per cent for the next fiscal from the previous 11 per cent on the back of a stronger carryover effect, a looser fiscal stance, and better virus containment.

The rating agency, in its latest Global Economic Outlook GEO, anticipates the level of the country's GDP to remain well below its pre-pandemic forecast trajectory. Fitch also expects GDP growth to ease to 5.8 per cent in Fiscal Year 2023, a downward revision of -0.5pp since December.

In a report, it said, India's recovery from the depths of the lockdown-induced recession in the second quarter of 2020 has been swifter than expected. GDP surpassed its pre-pandemic level in the fourth quarter of the current fiscal.

It also added that High-frequency indicators point to a strong start to 2021. The manufacturing Purchasing Managers' Index PMI remained elevated in February, while the pickup in mobility and a rise in the services PMI point to further gains in the services sector.

The rating agency notes that it no longer expects the Reserve Bank of India (RBI) to cut its policy rate, owing to a brighter short-term growth outlook and a more limited decline in inflation than it had forecast.

"The RBI will nonetheless keep its policy loose over the forecast horizon to shore up the recovery. The central bank will likely continue to use forward guidance on policy rates and carry out open-market operations to keep a lid on borrowing costs," it adds.