The year-end inflation projection was raised based on El Nino threat. "Nevertheless, the threat of El Niño means that inflation could exceed our forecasts, although the impact on consumers and the economy is likely to be temporary," Fitch said.
It expects 2023-end retail inflation at 5.5 per cent, higher than its previous forecast of 5 per cent.
High-frequency indicators suggest that the pace of growth in the July-September quarter is likely to moderate, Fitch noted in its September update of the Global Economic Outlook.
"The Indian economy continues to show resilience despite tighter monetary policy and weakness in exports, with growth outpacing other countries in the region," Fitch said.
The Indian economy grew 7.8 per cent in the April-June quarter of current fiscal on strong services sector activity and robust demand.
The Reserve Bank of India's (RBI) latest bimonthly consumer confidence survey shows consumers are turning a little more pessimistic on income and employment prospects, Fitch said.
On the price front, it said that the temporary increases in inflation, in particular rising food inflation, in coming months could curb households' discretionary spending power.
"The inflation impact on consumers may be temporary but other more fundamental factors are weighing on the economy.”
"India will not be immune to the global economic slowdown and the domestic economy will be affected by the lagged impact of the RBI's 250 bps of hikes in the past year, while a poor monsoon season could complicate the RBI's control of inflation," Fitch said.
Consumer price index based retail inflation was 6.8 per cent in August after 7.4 per cent in July and 4.9 per cent in June.
ALCHEMPro News Desk (DS)
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