New Delhi, Sep 15 (PTI) Fitch Ratings on Thursday slashed India's GDP growth projection for FY23 to 7 per cent, saying the economy is expected to slow against the backdrop of global economy, elevated inflation and high interest rate.

In June, it had forecast 7.8 per cent growth for India.

“We expect the economy to slow given the global economic backdrop, elevated inflation and tighter monetary policy. We now expect the economy to grow 7 per cent in the financial year to end-March 2023 (FY23) from 7.8 per cent previously, with FY24 also slowing to 6.7 per cent from 7.4 per cent before,” Fitch said in its September edition of the Global Economic Outlook.

As per official GDP estimates, the Indian economy expanded 13.5 per cent in June quarter, higher than 4.10 per cent growth clocked in January-March.

The RBI expects the economy to grow 7.2 per cent in current fiscal year.

The rating agency said inflation moderated in August as crude oil prices eased but the risk to food inflation persists given negative seasonality towards the end of this year.

The wholesale-price based inflation softened to 11-month low of 12.41 per cent in August, even though retail inflation inched up to 7 per cent.

It said the RBI has already front-loaded its policy rate hikes, tightening by a total of 140 basis points since the start of 2022 to 5.4 per cent in August.

“We expect the RBI to continue raising, to 5.9 per cent before year-end. The RBI remains focused on reducing inflation, but said that its decisions would continue to be “calibrated, measured and nimble” and dependent on the unfolding dynamics of inflation and economic activity. We therefore expect policy rates to peak in the near future and to remain at 6 per cent throughout next year,” Fitch said.

The US-based agency said it expects the rupee value to remain at 79 against the US dollar by the end of 2022, while the retail inflation at around 6.2 per cent.

It said supply shocks and inflation are hitting the world economy hard and expects the world GDP to grow by 2.4 per cent in 2022 – revised down by 0.5 percentage points.

In 2023, the world GDP will grow by just 1.7 per cent, 1 percentage points lower than previous estimates.

“ The eurozone and UK are now expected to enter recession later this year and the US is expected to suffer a mild recession in mid-2023,” Fitch said.

On China, it said the recovery is constrained by the pandemic restrictions and a prolonged property slump, while projecting growth to slow to 2.8 per cent this year and recover to only 4.5 per cent next year.

“We've had something of a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp acceleration in interest rate rises, and a deepening property slump in China,” said Brian Coulton, Chief Economist, Fitch Ratings.

(This story has been published from a wire agency feed without any modifications to the text. Only the headline has been changed.)