India to grow 7.5% in FY16, 7.7% in FY17: Fitch

This rating is on assumption that monsoon would be normal, wage hike for central govt employees

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Global credit rating agency Fitch Ratings, maintaining its forecast of India's gross domestic product's (GDP) growth at 7.5% for 2015-16, expects the growth at 7.7% for next fiscal.

According to a report by Fitch Ratings, India's GDP growth is expected to gradually accelerate to 7.7% next fiscal and 7.9% in 2017-18.

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"Real GDP growth in 4Q'15 was primarily driven by private consumption, while the data showed slowing fixed investment growth and December industrial production declined 1.3% yoy (year-on-year)," Fitch Ratings said.

According to Fitch Ratings, the gradual recovery in FY17 and FY18 will be supported by higher real disposable income on the assumption that the monsoon would be normal and wage hike for central government employees.

"The gradual implementation of the structural reform agenda is expected to contribute to higher growth, even though progress is lacking so far on big ticket reforms such as the Land Acquisition Amendment Bill and the Goods and Services Tax."

While Fitch Ratings expects the cut in monetary policy rate by a total of 125 basis points since the start of 2015 to feed GDP growth, it further expects another 25 basis points cut in the rates.

Fitch Ratings expects another 25 basis points of monetary policy loosening, facilitated by the government's recent announcement to maintain its fiscal targets for FY17 and FY18.

"We expect the Reserve Bank of India to remain keen to avoid a significant deviation from the glide path to its inflation target, as it is still building a track record for its new monetary policy framework," the rating agency said.