India’s gross domestic product (GDP) growth forecast was reduced recently to 6.6 per cent for this fiscal from 6.8 per cent projected earlier by global rating agency Fitch Ratings, which cited persistent slowdown in manufacturing and agriculture sectors as the reason, but retained its forecast for 2020-21 and 2021-22 at 7.1 per cent and 7 per cent respectively.
The lower GDP growth figures for India in Fitch’s latest Global Economic Outlook were attributed to weaker domestic consumption, slower global growth and the US-China trade conflict. Due to slow growth in employment generating sectors like agriculture, manufacturing and construction, the GDP growth was 5.8 per cent in the January-March quarter—the lowest growth outturn in five years.
The slowdown over the past year has been driven by steadily cooling activity in the manufacturing sector and, to a lesser extent, agriculture, a news agency reported citing the Fitch document, which said weaker momentum has been mainly driven by domestic reasons, though export growth has also faltered more recently.
The Reserve Bank of India has reduced interest rates by 25 basis points to 5.75 per cent in its June meeting—the third cut so far this year—to address growth concerns. The six-member Monetary Policy Committee (MPC) of the RBI also revised GDP growth projection for the current financial year from 7.2 per cent to 7 per cent. Fitch expects another 25 basis point cut later in 2019, which will push the policy repo rate down to 5.50 per cent.