Fitch Ratings projects India’s FY20 growth to slow down to 5.5%; IMF estimates a rebound to 7% next fiscal

Fitch Ratings has slashed India’s GDP growth forecast in the current fiscal to 5.5 per cent saying a large credit squeeze emanating from shadow banks has pushed economic growth to a six year low. Fitch, which had in June this year put India’s GDP growth at 6.6 per cent for the fiscal year that began in April 2019, said the recent government measures to boost economy including a cut in corporate tax rates will gradually nudge growth.

The projection is lower than 6.1 per cent that the Reserve Bank of India (RBI) had forecast in early October. GDP expansion will pick up to 6.2 per cent in the next financial year (2020-21) and to 6.7 per cent in the year after, Fitch said.

The Indian economy decelerated for the fifth consecutive quarter in April-June, with GDP expanding by a meagre 5 per cent, down from 8 per cent recorded a year earlier. This is the lowest growth outturn since 2013.

“Weakness has been fairly broad-based, with both domestic spending and external demand losing momentum,” Fitch said. “The Indian economy is being held back by a large squeeze in credit availability emanating from non-bank financial companies (NBFCs),” the agency said.

Meanwhile the International Monetary Fund (IMF) sees Indian economic growth rebounding to around 7 per cent in the next financial year, supported by measures like monetary policy stimulus and corporate income tax cuts.

“We see the Indian economy rebounding from our projected 6.1 per cent growth this fiscal year to something like 7 per cent in the next fiscal year (2020),” said Jonathan Ostry, Deputy Director, Asia Pacific Department at the IMF.

We see the factors that will support growth, including monetary policy stimulus, working their way through the pipeline,” he said. The recent tax cuts, the Government’s progress in addressing lingering weaknesses in the financial sector and measures to support growth sectors as seen as factors underpinning growth in the near term, Ostry said.

Shekhar Ghosh is consulting editor, He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at

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