New Delhi: Fitch Ratings, a global rating agency, has boosted India's medium-term growth potential by 0. 2 percentage points to 6. 4%, while lowering China's growth estimate by 0. 3 percentage points to 4. 3%.
The revisions are part of Fitch's new forecast for GDP growth in ten emerging market economies during the following five years.
In its most recent report, Fitch stated: "Our estimate of India's trend growth is somewhat higher at 6. 4 percent, compared with 6. 2 percent previously. " We anticipate that TFP growth will decline from recent years to match its long-run average of 1. 5%.
The review is prompted by a rapid increase in India's labor force participation rate in recent years. While the agency expects this increase to continue, it may do so at a slower rate in the future.
Fitch emphasised that the revised estimate for India indicates a greater contribution from labour inputs, namely total employment, rather than labour productivity.
The rating agency has also updated its forecasts based on a new evaluation of workforce data. It was observed that the contribution from the participation rate had been revised upwards, but the expected contribution from capital deepening had been reduced.
Another important element in the agency's prediction is total factor productivity (TFP). Fitch expects TFP growth in India to slow from recent years and match with its long-term average of 1. 5%.
In contrast, the outlook for China has grown somewhat bleak. The company has reduced China's supplyside GDP growth prediction from 4. 6% to 4. 3%.
According to the study, this is due to a variety of variables, including slower capital deepening. The current drop in the real estate market has harmed total investment, contributing to the downgrade.
Furthermore, Fitch observed a somewhat steeper drop in China's predicted labor force participation rate and a somewhat lower TFP growth, which is now projected to be in line with the five-year average ending in 2023.
Fitch's most recent estimate shows a changing growth trajectory among key emerging nations, with India gaining marginally more ground while China's economic prospects decline somewhat.
