The economic growth of India will rise to 7.3 percent in the next fiscal year and further to 7.5 percent in 2019-20 as stated by Fitch. This US-based agency has also forecast that the economy of India will see a growth rate of 6.5 percent this fiscal year which will be lower than the official estimates by the Central Statistics Office of 6.6 percent. The economy had grown by 7.1 percent in 2016-17. According to Fitch, this growth has resulted from the influence of a one-off policy related factor which was dragging the growth. It also said that the money supply was recovered from the pre-demonetization level in mid-2017 and has been increasing gradually ever since similar to the previous trend.
Also, the disturbance related to the rollout of the goods and services tax in July 2017 has reduced slowly. After showing some recovery, the Indian economy had hit a five-quarter high of 7.2 percent in the period of October-December in key sectors including agriculture, manufacturing, and construction. As per Fitch, the Budget for the 2018-19 fiscal starting from April has seen a slower pace and should, therefore, support the near-term growth outlook.
According to Fitch, the minimum support price scheme for agricultural products and increased customs duties on certain products including textiles, electronics, and auto parts will increase the prices against the backdrop of accelerating growth. It is also expected by the Reserve Bank of India to increase their interest rates next year as the growth gains a grip while the inflationary pressures remain high. The inflation is expected to be a bit below 5 percent in 2018 and 2019 in the upper band of the Reserve Bank’s target.