New Delhi: Fitch Ratings Wednesday raised India growth forecast for 2018-19 to 7.4 per cent from 7.3 per cent, but cited higher financing costs and rising oil prices as risks to growth.
For 2019-20, it estimated the country to grow at 7.5 per cent.
“We have revised up our forecast for 2018-19 growth to 7.4 per cent from 7.3 per cent in March. However, higher financing costs (stemming from monetary tightening and higher market premiums) and rising oil prices should limit the upside to growth,” Fitch said in its Global Economic Outlook.
The economy grew at 6.7 per cent in 2017-18 and 7.7 per cent in January-March quarter.
Fitch said the Indian rupee has been one of the worst performing currencies in Asia this year, although the depreciation was more muted than during the 2013 taper-tantrum episode.
“India has better macroeconomic fundamentals than in 2013 and very low foreign ownership rates in the domestic government bond market, but the current account deficit has been widening as a result of rising oil prices, reviving domestic demand and poor manufacturing export performance,” it said.
Last month, US-based Moody’s cut India’s growth forecast for 2018-19 to 7.3 per cent from 7.5 per cent citing rising oil prices.
Fitch also said the near-term global growth prospects remain robust despite rising trade tensions and political risks. “Global trade tensions have risen significantly this year, but at this stage the scale of tariffs imposed remains too small to materially affect the global growth outlook. “A major escalation that entailed blanket across-the-board geographical tariffs on all trade flows between several major countries would be much more damaging,” says Brian Coulton, Fitch’s Chief Economist.
Fitch downgrades viability ratings of SBI, BoB
Mumbai: Global rating agency Fitch Wednesday downgraded the viability ratings (VRs) of State Bank of India (SBI) and Bank of Baroda (BoB), but affirmed their ‘BBB’ long-term issuer default ratings, along with that of Canara Bank and Bank of India (BoI). The agency has also retained the stable outlook on these lenders. Fitch has downgraded the VRs of SBI and BoB by one-notch to ‘BB+’ and ‘BB’, respectively, citing “their weakened intrinsic risk profile due to the negative effect of persistently poor asset quality and earnings on their capital position”. The agency, which has a negative sector outlook on the domestic banks, however, said the new NPA framework has accelerated bad-loan recognition, and should improve the health over the long term. “However, heavy losses and capital erosion reinforces our belief that sector core capitalisation will remain weak unless authorities provide more capital than the budgeted $ 11 billion,” it added.