New Delhi, May 22 (IANS) Global Rating Agency Fitch Ratings on Thursday increased India’s GDP growth estimate to 6.2 percent to 6.4 percent for the next five years. The reason for this is the rapid increase in the country’s labor force participation rate in recent years.
Fitch said, “Our estimate for India’s trend growth is 6.4 percent, which was 6.2 percent earlier. We think the TFP growth will slow down from recent years and will suit the long -term average of 1.5 percent.”
Total-Factor Productivity (TFP), also known as multi-factor productivity, is usually measured as a ratio of total production (GDP) and total input.
The global rating agency has reduced China’s growth estimates by 0.3 percent to 4.3 percent, earlier 4.6 percent.
This change is part of the revised assessment of the fitch of potential GDP growth for 10 emerging market economies over the next five years.
Fitch reported that the revised estimate for India shows more contribution than labor input (mainly in total employment) rather than labor productivity.
The rating agency has also made changes in its estimates based on the revised evaluation of the labor force data.
Fitch said that the contribution at the participation rate has been revised upwards, while the estimated contribution of capital intensity has been reduced.
Fitch Ratings said, “Our amended estimates show that labor input (total employment) contributes more than labor productivity. India’s labor force participation rate has increased rapidly in recent years; we hope that this productivity will continue to increase.”
Fitch Ratings director Robert Sierra said, “Our new update to the potential growth in emerging markets is now at 3.9 percent, showing a slight decline from our 4 percent estimate published in November 2023. It mainly reflects a low possible growth in China.”
The global rating agency said that China’s low capacity could cause weak capital intensive and a sharp decline in labor force participation.
According to the IMF report released last month, India remains the fastest growing major economy in the world and is the only country to register more than 6 percent in the next two years. The IMF has cut development forecast for more than 120 countries.
-IANS
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