Tuesday , March 26 2019

Global rating agency Fitch:Economy to grow 7.1 per cent in FY17

The US-based rating agency fitch says that economy to grow  7.1 percent in the current financial before stepping up to 7.7 percent in the next two financial years.

The US-based Global rating agency Fitch on Tuesday said that  Indian economy will grow by 7.1 per cent in the current financial before stepping up to 7.7 per cent in the upcoming next two financial years.

The Global rating agency, however, termed the 7 per cent GDP growth for the October- December quarter of 2016 as “surprising”. Still, Gross Domestic Product growth slowed to an annual of 7.0 percent in the December quarter from 7.4 percent pace for July-September period.


 “This number looks somewhat surprising, as real activity data released since demonetisation pointed to weak consumption and services activity because these transactions are cash-intensive. By contrast, official data suggest that
private consumption was strong in the fourth quarter of 2016 (though services output growth moderated quite substantially),” Fitch said.

Fitch also expects that  Indian GDP to grow by 7.1 per cent for 2016-17, before stepping up to 7.7 per cent in both 2017-18 and 2018-19. It said that the GDP in the December quarter number suggests that economic activity was “hardly hit” by the cash crunch after the government’s move to ban RS 500, Rs 1000 in the circulation of overnight.

On this disparity, Fitch said it could be the incapability of official data to capture the negative effects of the demonetisation on the informal sector. However, the formal sector  yields surprising results.

Fitch  said, “This raises the possibility that these initial estimates of the growth impact of note bans could well be underestimated, with the possibility of revisions to official GDP data later on.”

“By the implementation of the structural reform agenda is expected to give higher growth, as will higher real disposable income, sustained by an almost 24 per cent hike in civil servants’ salaries at the state level,” Fitch said.

Fitch projection of growth for this fiscal is in line with the approximations of CSO and global think-tank OECD. The Global rating agency said it also  expects the policy interest rate to stay at its current level of 6.25 per cent.

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