Fitch reduces FY23 India growth forecast to 8.5 pc over high fuel prices

With the Omicron wave subsiding quickly, containment measures have been scaled back, setting the stage for a pick-up in GDP growth momentum in the June quarter this year, the agency said.

"However, we have lowered our growth forecast for FY 2022-2023 to 8.5 percent (-1.8 pp) on sharply higher energy prices," Fitch said while revising up its inflation forecasts.

In its Global economic Outlook-March 2022, Fitch said the post-COVID-19 pandemic recovery is being hit by a potentially huge global supply shock that will reduce growth and push up inflation.

"The war in Ukraine and economic sanctions on Russia have put global energy supplies at risk. Sanctions seem unlikely to be rescinded any time soon," the agency said.

Russia accounts for nearly 10 percent of the world's energy, including 17 percent of its natural gas and 12 percent of the oil.

" The jump in oil and gas prices will add to industry costs and reduce consumers' real incomes...Higher energy prices are a given," Fitch said as it cut the world GDP growth forecast by 0.7 percentage points to 3.5 percent.

The report noted that Indian GDP growth was very strong in the December quarter, adding that the GDP is more than 6 percent more than the pre-pandemic level though it is still well below its implied pre-pandemic trend.