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India to grow 5.6% this fiscal, 6.5% in FY'16: Fitch

October 01, 2014 14:50 IST

India's growth is expected to accelerate to 5.6 per cent in the current fiscal and further to 6.5 per cent in 2015-16, buoyed by strong investments and political certainty, rating agency Fitch said on Wednesday.

"The new government has started rolling out a number of policies, which may improve the efficiency of the bureaucracy and strengthen the investment climate," Fitch said.

Fitch expects GDP growth to pick up to 5.6 per cent in FY15 (ending in March) and 6.5 per cent in both FY16 and FY17, the agency said in its global economic outlook report.

"Investment is likely to rise now that political uncertainty has disappeared since the new government came to power last May," it added.

RBI has projected a 5.5 per cent GDP growth for the current fiscal and 6.3 per cent for 2015-16. Fitch further said the expected pick-up is supported by the 5.7 per cent GDP growth in April-June quarter of current fiscal.

India had clocked sub-5 per cent growth in the previous two fiscals.

It grew 4.5 per cent in in 2012-13 and 4.7 per cent in 2013-14.

Fitch said lifting GDP growth to substantially higher levels would require large productivity gains through implementation of reforms related to governance, product and labour markets, as well as reduction of infrastructure bottlenecks.

It said India will be the only BRIC nation where growth picks up in 2014 and further accelerates in 2015 owing to an expected improvement in business environment.

The agency has a stable outlook on India's 'BBB-' rating. Fitch said in the longer run, a credible low inflation environment would benefit growth by improving the investment environment.

WPI inflation fell to a 5-year low of 3.74 per cent while the retail inflation was at 7.8 per cent in August.

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