Fitch upgrades India's mid-term GDP growth forecast to 6.2% from 5.5%

Fitch blamed China for pulling down the estimate of 10 emerging countries to 4 per cent from 4.3 per cent earlier

Ratings agency Fitch on Monday upgraded India's gross domestic product (GDP) mid-term growth forecast by 70 basis points to 6.2 per cent from 5.5 per cent earlier. It blamed China for pulling down the estimate of 10 emerging countries to 4 per cent from 4.3 per cent earlier. 

"The reduction is mainly due to a large reduction of 0.7 percentage points to the estimate of China's supply-side growth potential," the agency said in its report "Emerging-Market Potential Growth Weakens as China Slows". China's mid-term growth forecast has been cut to 4.6 per cent from 5.3 per cent. 

"However, we have made large upgrades to India and Mexico, with the latter benefitting from a much better outlook for the capital-to-labour ratio. India's estimate is higher at 6.2 per cent from 5.5 per cent and Mexico's at 2 per cent from 1.4 per cent," it added.

For 2023-24, Fitch has said that India is expected to grow at 6.3 per cent.

The forecast for Russia has been cut to 0.8 per cent from 1.6 per cent, for Korea to 2.1 per cent from 2.3 per cent and for South Africa to 1 per cent from 1.2 per cent.

The agency also said the latest estimates remain below its pre-pandemic potential growth projections for all the top 10 emerging markets (EM10), except Brazil and Poland.

"This reflects deteriorating demographic trends and the legacy of disruptions from the pandemic. The latter is partly reflected through revisions to projections for capital stock and productivity growth," it said. "But some 'scarring' effects are hard to capture and we have now made additional downward 'level shock' adjustments to historical estimates of potential GDP in 2020 and 2021 for Mexico, Indonesia, India and South Africa."

Fitch also said that including these level shocks and changes to its forward-looking growth estimates means that the projected level of EM10 potential GDP by 2027 is three percentage points below the path implied by extrapolating forward our pre-pandemic estimates of potential growth from 2019.