Ratings firm Fitch, on Friday, lowered India’s growth projection for the current fiscal to 6 per cent from 6.5 per cent estimated earlier citing challenging economic outlook.
“India’s economic outlook remains challenging. The projections for real gross domestic product (GDP) growth (has been trimmed) to 6 per cent for 2012-13 from a previous estimate of 6.5 per cent,” Fitch said in its Global Economic Outlook report.
India’s economic growth has slowed to a three-year low of 5.3 per cent in the April-June quarter of the current fiscal.
The growth had fallen to 6.5 per cent in the 2011-12 fiscal.
Fitch said the high fiscal deficit left little room for government for fiscal easing and increasing spending.
It said weak investments were affecting supply capacity and thereby pointing towards weaker growth outlook.
Fitch also cautioned that volatile political environment poses risk towards implementation of various reform initiatives unveiled by the government earlier this month.
“From a monetary perspective, elevated inflationary pressures suggest that the Reserve Bank of India may not be able to aggressively cut policy rates in the near term,” it said.
Both the wholesale price index (WPI) and the new consumer price index (CPI) show inflation pressures have again accelerated.