ranking company Fitch on Tuesday slashed India’s growth forecast for the following fiscal to eight.5 per cent from 10.3 per cent, citing sharply excessive vitality costs on account of the Russia-Ukraine struggle.

With the Omicron wave subsiding shortly, containment measures have been scaled again, setting the stage for a pick-up in GDP progress momentum within the June quarter this yr, the company stated.

It has revised upwards the GDP progress forecast for the present fiscal by 0.6 proportion factors to eight.7 per cent.

“However, we have lowered our growth forecast for FY 2022-2023 to 8.5 per cent (-1.8 pp) on sharply higher energy prices,” Fitch stated whereas revising up its inflation forecasts.

In its Global financial Outlook-March 2022, Fitch stated the post-COVID-19 pandemic restoration is being hit by a doubtlessly enormous world provide shock that may cut back progress 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 Sanctions seem unlikely to be rescinded any time soon,” the company stated.

Russia provides round 10 per cent of the world’s vitality, together with 17 per cent of its pure fuel and 12 per cent of oil.

“The jump in oil and gas prices will add to industry costs and reduce consumers’ real incomes…Higher energy prices are a given,” Fitch stated because it minimize the world GDP progress forecast by 0.7 proportion factors to three.5 per cent.

Observing that Indian GDP progress was very robust within the December quarter, the company stated the GDP is greater than 6 per cent above its pre-pandemic degree although it’s nonetheless nicely beneath its implied pre-pandemic pattern.

“High-frequency data indicate that the Indian economy has ridden out the Omicron wave with little damage –in stark contrast with the two previous coronavirus waves in 2020 and 2021,” it stated.

Fitch now sees inflation strengthening additional, peaking above 7 per cent within the December quarter of 2022, earlier than regularly easing.

The company expects inflation to stay elevated all through the forecast horizon, at 6.1 per cent annual common in 2021 and 5 per cent in 2022.

“Local fuel prices have been flat over the past weeks, but we assume that oil companies will eventually pass on higher oil prices to retail fuel prices (with some offset from a reduction in the excise duty by the government),” it added.