05 Jan 2018 13:45 IST

Fitch bullish on India, pegs medium-term growth at 6.7%

‘India has best medium-term growth potential among emerging economies’

Ahead of the first advance estimates for GDP growth for 2017-18, Fitch Ratings on Thursday expressed optimism about India’s medium-term economic prospects and said it would outstrip China’s growth.

In its latest report, it has projected India’s potential growth at 6.7 per cent annually over the next five years and has estimated India to grow by 6.4 per cent in 2017, 7.3 per cent in 2018 and 7.6 per cent in 2019.

In contrast, China and Indonesia are projected to grow at 5.5 per cent in the medium term, recording the second highest growth, said the report.

“New estimates of supply-side potential GDP growth over the next five years highlight the importance of demographic factors and investment rates and place India at the top of the list among the 10 largest emerging markets,” said Fitch Ratings in its Global Economic Outlook (GEO) forecast.

The Central Statistics Office will release the first advance estimates for national income for 2017-18 on Friday that will be a key input for the Union Budget 2018-19.

The economy grew by 6 per cent in the first half of the fiscal but the government is hopeful of a turnaround in the second half as the impact of demonetisation and the Goods and Services Tax wears off.

Fitch said the trend total factor productivity in India is expected to increase after recent “ambitious” structural reforms such as the GST and the Insolvency and Bankruptcy Code.

“Strong labour productivity growth and the fastest working-age population growth for the 10 countries are supportive of India’s high supply-side potential growth,” it said.

However, recent trends in investment, with the investment-to-GDP ratio falling since 2012 could dampen India’s supply-side outlook, it warned.

The report has tracked 10 emerging economies including Russia, Korea, South Africa, Brazil, Indonesia, Turkey, Mexico and Poland.

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