The global rating agency said domestic demand will be the key driver of growth, as strong real income dynamics support consumer spending and looser financial conditions should feed through to investment.
Fitch highlighted that the revised estimate for India shows a stronger contribution from labour inputs, mainly total employment, rather than labour productivity.
Fitch Ratings cut India's GDP growth estimate by 10 basis points to 6.4 per cent for the current fiscal.
After the indictment by the US Securities and Exchange Commission (SEC), the rating agency Fitch has revised the outlook on four Adani group firms from “stable” to “negative”.
Notably, the board of Reserve Bank of India (RBI), last week decided to transfer a record Rs 2.1 trillion dividend to the government out of the profits earned in fiscal 2023-24.
It added the Indian economy also continues to benefit from high bank credit growth and infrastructure spending, with more to come from the latter.
As per Fitch, operating environment for banks will most likely remain challenging against this backdrop.
The trend, thereby, lowers the downside risks for OMCs credit metrics, it said.
Fitch forecasts real GDP to rebound by 11 per cent in FY22 (2021-22) and grow around 6.6 per cent per annum through FY26.
Standard & Poor’s has already observed that the recession caused by the pandemic will have a deeper and longer impact on lenders than apprehended earlier and that gross NPAs may jump to 14 per cent in the current financial year, up from 8.5 per cent.
