India also received positive news when the recent GDP growth numbers reversed a five-quarter slowdown and jumped to 6.3 per cent. The International Monetary Fund (IMF) had also said it will update its growth rate forecast for India in January next year.
Apart from this fiscal, Fitch has also reduced India's GDP growth forecast for the 2018-19 fiscal year from 7.4 percent to 7.3 percent. On the other hand, Standard & Poor's (S&P), retained India's sovereign rating, showing concerns over certain parameters. The rating firm stated that growth has repeatedly disappointed in recent quarters, although this has partly reflected one-off factors including the demonetisation programme of November 2016 and disruptions related to the implementation of the introduction of the Goods and Services Tax (GST) in July 2017.
GST slows service activity in November, PMI at 3 month low
As per the survey, underlying data highlighted that service activity fell in response to a drop in new business during November. The Council slashed the GST rates on AC and non-AC restaurants to 5% from the earlier 18% during its 23rd meet.
Inflation still running at low levels on muted food prices and rupee appreciating quite sharply against the U.S. dollar since the beginning of this year give headroom for the RBI to keep interest rates quite low in order to help lift the economy, Fitch added.
According to Fitch, gradual implementation of the structural reform agenda by the Modi government is expected to contribute to higher growth, as will higher real disposable income.
The ratings agency pointed out that the "two-year large bank recapitalisation plan" for state banks and the government's road construction plan should encourage investment growth outlook. "The INR has also appreciated quite sharply against the Dollars since the beginning of this year despite a narrowing interest rate differential between the US Fed policy rate and the Reserve Bank of India's (RBI)". The details are not clear yet, but the package is likely to help address the capital shortages that have hindered the banks' lending capacity, it said.
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