New Delhi, NFAPost: Fitch Ratings on Thursday revised India’s medium-term GDP growth potential till FY2026 upwards to 6.4%, from its earlier projection of 6.2%.
“We have increased potential growth in India by 0.2pp to 6.4% as higher estimates for labour force participation more than offset a lower contribution from labour productivity,” the ratings agency said, while noting that there has been “less pandemic scarring in India”.
Fitch Ratings has slightly lowered its medium-term potential GDP projections over the next five years for the 10 emerging market economies covered in its Global Economic Outlook.
“Our update of potential growth in emerging markets is now 3.9%, representing a further, albeit marginal, drop from the 4% estimate we published in November 2023. This mainly reflects lower potential growth in China,” said Robert Sierra, Director, Fitch Ratings.
Fitch expects total factor productivity in India to slow from recent years, reverting to its long-run average of 1.5 per cent. It also anticipates India’s labour force participation rate will continue to increase, albeit at a slower pace.
“Our revised estimate implies that there is a stronger contribution from labour inputs (total employment) rather than labour productivity,” the Fitch Ratings report stated.
Meanwhile, the agency has maintained its lower growth projection for China at 4.6 per cent due to weaker capital deepening, as the property market adjustment continues to weigh on overall investment.
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