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Fitch Ratings has cut India's Gross domestic product (GDP) growth forecast to 8.4 percent from the previous 8.7 percent for the current fiscal year ending March 31, 2022, saying the rebound after the second wave of COVID infections has been subdued than expected. However, it raised the economic growth projection for the next financial year (FY23) to 10.3 percent from previously forecast 10 percent.

According to the report, the economy had contracted by 7.3 per cent in the 2020-21 fiscal as restrictions imposed to curb spread of coronavirus pummelled business activity. It said India's economy staged a strong rebound in 3Q21 (July-September 2021) from the Delta variant-induced sharp contraction. It also said the GDP rose a sharp 11.4 per cent when compared to the preceding April-June quarter when it had slumped 12.4 per cent. However, it said the bounce was more subdued than it expected. The rebound in the services sector was weaker than hoped for.

Nevertheless, the report said business surveys and mobility data point to activity growing robustly in 4Q21 (October-December 2021). Growth in the manufacturing sector is constrained by ongoing supply shortages, but the supply bottlenecks are expected to ease in the coming months. Carmakers are signalling a ramp-up of production while domestic coal production is increasing to make up for shortages. Fitch said it expects the services sector to show a strong reading amid the lifting of most restrictions.