Fitch cuts India’s growth GDP forecast for 2021-22 to 8.4%

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Ratings agency Fitch on Wednesday cut India’s economic growth forecast to 8.4% for the year ending March 31, 2022. It sais the rebound after the second wave of COVID infections has been subdued than expected.

Fitch, which had earlier forecast a GDP growth of 8.7% for 2021-22, however, raised the economic growth projection for the next financial year (FY23) to 10.3% from previously forecast 10%.

“India’s economy staged a strong rebound in 3Q21 (July-September 2021) from the Delta variant-induced sharp contraction,” Fitch said in its Global Economic Outlook (GEO).

The economy had contracted 7.3% in the 2020-21 fiscal as the lockdown due to civid restrictions imposed to curb spread of coronavirus pummelled business activity.

The GDP rose a sharply by  11.4% when compared to the preceding April-June quarter when it had slumped 12.4%.

Nevertheless, business surveys and mobility data point to activity growing robustly in 4Q21 (October-December 2021). Growth in the manufacturing sector is constrained by ongoing supply shortages, but the supply bottlenecks are expected to ease in the coming months.

Fitch said it expects the services sector to show a strong reading amid the lifting of most restrictions. “We have cut our FY22 (financial year ending March 2022) GDP growth forecast, to 8.4 per cent (-0.3pp). GDP growth momentum should peak in FY23, at 10.3 per cent (+0.2pp), boosted by a consumer-led recovery and the easing of supply disruptions,” it said.