Fitch cuts India's FY20 GDP growth forecast to 5.5 pc

Fitch Ratings on Thursday slashed India's GDP growth forecast in the current fiscal to 5.5 per cent saying a large credit squeeze emanating from shadow banks has pushed economic growth to a six year low.

Fitch, which had in June this year put India's GDP growth at 6.6 per cent for the fiscal year that began in April 2019, said the recent government measures to boost economy including a cut in corporate tax rates will gradually nudge growth.

The projection is lower than 6.1 per cent that the Reserve Bank of India (RBI) had forecast in early October.

GDP expansion will pick up to 6.2 per cent in the next financial year (2020-21) and to 6.7 per cent in the year after, Fitch said.

The Indian economy decelerated for the fifth consecutive quarter in April-June, with GDP expanding by a meagre 5 per cent, down from 8 per cent recorded a year earlier. This is the lowest growth outturn since 2013.

"Weakness has been fairly broad-based, with both domestic spending and external demand losing momentum," Fitch said. "The Indian economy is being held back by a large squeeze in credit availability emanating from non-bank financial companies (NBFCs)."