Rating agency Fitch on Tuesday lowered India's GDP growth forecast to 8.5 per cent for the financial year 2022-23 citing the risks to the economy due to higher energy prices.
"We have lowered our growth forecast for FY 2022-2023 to 8.5 per cent (-1.8 pp) on sharply higher energy prices," Fitch said in its global economic outlook report. In its earlier report released by December 2021, Fitch had pegged India's GDP growth for 2022-23 at 10.3 per cent.
However, for the current financial year ending March 31, Fitch has revised its growth outlook by 0.6 percentage points to 8.7 per cent from the earlier estimate of 8.1 per cent announced in December 2021.
The rating agency said capital expenditure-led Budget, Reserve Bank of India's accommodative policy and little damage on the Indian economy from the omicron wave have set the stage for GDP pickup in the current financial year.
Though, the rating agency said the Russia-Ukraine conflict will impede growth in India and other emerging markets that are dependent on imports to meet their energy demands.
Citing the risks from the Russia-Ukraine crisis, Fitch cut the world GDP growth forecast by 0.7 percentage points to 3.5 per cent.
"The post-COVID-19 pandemic recovery is being hit by a potentially huge global supply shock that will reduce growth and push up inflation. The war in Ukraine and economic sanctions on Russia have put global energy supplies at risk. Sanctions seem unlikely to be rescinded any time soon," Fitch said in the report titled 'Global Economic Outlook - March 2022'.
Russia supplies around 10 per cent of the world's energy, including 17 per cent of its natural gas and 12 per cent of its oil. The jump in oil and gas prices will add to industry costs and reduce consumers' real incomes.
Outright shortages and energy rationing are possible in Europe if there is an abrupt halt to Russian supply. Higher energy prices are a given, Fitch noted.
Fitch Ratings has cut its world GDP growth forecast for 2022 by 0.7 percentage points to 3.5 per cent, with the eurozone cut by 1.5 percentage points to 3.0 per cent and the US by 0.2 percentage points to 3.5 per cent.
This reflects the drag from higher energy prices and a faster pace of US interest rate hikes than anticipated. We have lowered our forecast for world growth in 2023 by 0.2 percentage points to 2.8 per cent, Fitch said.
( With inputs from ANI )
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