What is the reason for Fitch downgrading India’s GDP growth for FY23?

Fitch Ratings, among the top 3 rating agencies in the world along with S&P and Moody’s, has slashed India's GDP growth forecast For FY23 from 10.3% to 8.5%. That is effectively 180 bps of GDP downsizing and comes in the aftermath of Moody’s also downgrading India’s likely GDP growth for 2023. This GDP downgrade has been essentially driven by sharply higher energy prices, which is expected to boost inflation and hit growth.

Fitch has specifically pointed out that the subsiding Omicron wave had actually set the stage for a revival in GDP growth momentum. However, the Ukraine war and the surge in oil prices did come as an unpleasant surprise for the Indian economy. However, Fitch has upgraded India’s FY22 GDP from 8.1% to 8.7%. Fitch has argued that the post-pandemic recovery has hit a roadblock due to supply shock, falling growth and surging inflation.