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Last updated: 07 Dec, 2018  

fitchTHMB.jpg Fitch cut India's GDP projection, Modi claims unprecedented growth

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SME Times News Bureau | 07 Dec, 2018

Prime Minister Narendra Modi on Friday blamed the "lack of intent" of previous governments making the nation lag behind in all aspects until the BJP came to power in 2014.

"The fundamental question to be asked is why India, even 67 years of independence, continued to be underdeveloped?

"Eminent personalities ruled the country and went away but Indians yearned for even the basic of services. For over six decades, the issues faced by the masses were never resolved, why?

The comment came a day after global ratings agency Fitch Ratings on Thursday had cut India's growth forecasts to 7.2 per cent from an earlier projection of 7.8 per cent rise for fiscal year ending March 2019.

"We have lowered our growth forecasts on weaker-than-expected momentum in the data, higher financing costs and reduced credit availability," the agency said in its Global Economic Outlook for December.

"We now see GDP growth at 7.2 per cent in the fiscal year ending March 2019 (FY19), followed by 7 per cent in FY20 and 7.1 per cent in FY21."

Enumerating his government's various schemes and projects and informing how the country has seen "unprecedented progress" in all fields, Modi said: "If the previous governments had done all this work, then how would they have pursued the politics of vote-bank, their politics of appeasement".

"Can you imagine that Mizoram, Meghalaya and Tripura were not on the railways map before we came to power.

"If the intention and the work culture that exists now, if it existed earlier, one can only imagine the progress the country could have made," said Modi.

In its report, Fitch added, "The widening of the current account deficit amidst tighter global financing conditions should put downward pressure on the currency, and we forecast the INR to weaken to 75 against the dollar by end-2019."

According to the outlook report, the country's banking sector is still struggling with a high proportion of non-performing assets, while non-banking financial institutions (NBFIs) are facing tighter access to liquidity following the default of IL&FS, one of the 30 biggest NBFIs in India.

However, the report said that fiscal policy should continue to support growth in the run-up to elections in early 2019.

"Stepped-up public investment has helped to stem the downward trend in the investment/GDP ratio, boosted by infrastructure spending. There have also been measures to support rural demand," the report said.

On the inflation trend, the outlook said that headline inflation has slipped in recent months, and touched a 13-month low in October, at 3.3 per cent year-on-year.

"Food prices have pulled the headline index down, but core inflation remains elevated. We expect inflation to edge up mildly in the coming months, on normalising food prices and higher import prices stemming from the depreciation of the rupee (INR)," the report said.

Gross Domestic Product (GDP) growth of India slowed during the second quarter of 2018-19 to 7.1 per cent from 8.2 per cent in Q1, shows official data last week.

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