Fitch Ratings cut India's FY22 economic growth forecast to 8.4%

Fitch Ratings cut India’s economic growth forecast to 8.4 per cent, from the previous 8.7 per cent for the current fiscal year (2021-22, or FY22) on Wednesday.

The rating agency said risks to recovery remain, especially in the near term, given that less than one-third of the population is fully vaccinated. The newly discovered Omicron variant has added to the risk, it said.

However, the rating agency said the economy staged a strong rebound in the second quarter of FY22 from the Delta variant-induced sharp contraction. According to its estimates, gross domestic product (GDP) rose a sharp 11.4 per cent quarter-on-quarter in seasonally adjusted terms after slumping by 12.4 per cent in the first quarter.

“However, the bounce was more subdued than we expected in our September outlook. The rebound in the services sector was weaker than hoped for,” it said.

On the positive side, Fitch said recovery in domestic economic activity is turning increasingly broad-based, with expanding vaccination coverage, slump in fresh Covid cases, and rapid normalisation of mobility.

It raised GDP growth projections to 10.3 per cent, from the earlier expected 10 per cent for the next fiscal year (2022-23).