New Delhi: Fitch Ratings has downgraded India’s growth outlook to 6.9 per cent for 2016-17 from the earlier 7.4 per cent due to “uncertainty” over the benefits of demonetisation.
“The demonetisation of large denomination bank notes has caused short-term disruption in India’s economy and led us to downgrade our growth forecasts for 2017,” Fitch Ratings said in its latest bi-monthly newsletter released on Tuesday.
“The move has some potential benefits, but the positive effects are unlikely to be strong or last long enough to make a significant difference to government finances or medium-term growth prospects.
“The impact on the economy will increase the longer the disruption continues, but Fitch has already revised down its GDP growth forecast for the financial year ending March 31 to 6.9 per cent from 7.4 per cent,” it said.
The move has the potential to raise government revenue and encourage bank lending, but Fitch Ratings believes the positive effects were unlikely to be strong and sufficiently enduring to support credit profiles, it said.