Fitch Ratings on Thursday slashed India’s economic growth forecast for FY23 to 7% from 7.8% projected in June, and said it expects key policy rates of theReserve Bank of India (RBI) to peak in the near future and remain at 6% through next year. In August, the RBI had raised the repo rate by 50 basis points to 5.4%.

Fitch Rating also lowered India’s GDP growth rate for FY24 to 6.7% from 7.4% it forecast earlier. The changes are in line with a cut in global economic forecast for the current year by Fitch.

The rating agency cut its global economic growth forecast due to the European gas crisis, high inflation and a sharp acceleration in the pace of global monetary policy tightening which are taking a heavy toll on economic prospects. The agency now expects world GDP to grow 2.4% in 2022, revised down by 0.5 percentage point, and to expand just 1.7% in 2023, down by one percentage point. Fitch Ratings said that India’s central bank has already front-loaded its policy rate hikes, tightening by a total of 140 basis points since the start of 2022 to 5.4% in August. “We expect the RBI to continue raising, to 5.9% 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 the near future and to remain at 6% throughout next year,” said the agency’s latest global economic outlook.