DNA Money Edit: What Fitch's GDP revision tells us

Fitch Ratings's move to cut India's GDP growth forecast for 2017-18 to 6.7% from the earlier projected 6.9% underlines its conviction that India's growth recovery is weak. The development that comes soon after the economy reported green shoots endorses the view of many analysts who revised downwards their GDP growth target in the aftermath of second-quarter growth figures.

The global rating agency, which also cut growth forecast for 2018-19 to 7.3% from 7.4%, however, expects the economic growth to pick up in the next two years on the back of gradual implementation of the structural reform agenda and higher real disposable income. The agency said the growth has repeatedly disappointed in recent quarters, partly because of one-off factors including the demonetisation and disruptions related to the implementation of the Goods and Services Tax (GST) in July 2017.

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. Recent moves by the government should help support the growth outlook and enhance business confidence, it says. What is more, it believes that the two-year bank recapitalisation plan of Rs 2.1 lakh crore (1.4% of GDP) would help address the capital shortages that have hindered the banks' lending capacity.