Fitch Ratings on Wednesday slashed India’s economic growth forecast for the current financial year to 7% from its estimate of 7.8% made in June, Reuters reported.

It also projected that the growth will slow down to 6.7% in the next financial year compared to the previous estimate of 7.4%.

The rating agency cited the global economic condition, elevated inflation and tighter monetary policy as the reasons for the latest outlook. “Inflation moderated in August as crude oil prices eased, but the risk to food inflation persists given negative seasonality towards the end of this year,” the agency added.

Rupee will remain at 79 against the US dollar by the end of 2022, while the retail inflation at around 6.2%, the agency said, according to PTI.

Retail inflation in India has remained above the upper limit mandated by the Reserve Bank of India for eight months. The central bank aims to keep inflation in the range of 2% to 6%.

On August 5, the Reserve Bank of India said that inflation is expected to remain above its 6% threshold in the second and third quarters of this financial year.

The bank has increased the repo rate by 50 basis points to 5.40% on three occasions this year to control inflation. The repo rate is the interest rate at which the central bank lends to commercial banks.

The bank also said that it was uncertain about when the Monetary Policy Committee will stop hiking the interest rate as the global economic situation was dynamic and uncertain.

On Wednesday, Fitch Ratings said it expects the policy interest rates to peak and remain at 6% throughout next year, Reuters reported.

On September 1, global ratings agency Moody’s had mentioned that the Reserve Bank of India could maintain a reasonably tight policy stance in 2023 to prevent domestic inflationary pressures from building further.

The ratings agency had cut down India’s economic growth for the current fiscal to 7.7% from its previous estimate of 8.8% in May. It also lowered India’s growth forecast for 2023 to 5.2% from 5.4%.

UK, US could suffer recession: Fitch

In its global economic outlook, Fitch said the eurozone and the United Kingdom could enter recession later this year, ANI reported. Eurozone is the monetary union of the 19 countries that are a part of the European Union.

The United States, according to the rating agency, will suffer a mild recession in mid-2023.

“We have had something of a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp acceleration in interest rate hikes and a deepening property slump in China,” said Brian Coulton, chief economist at Fitch Ratings.

Fitch expects the global economy to grow by 2.4% in 2022, which was revised by 0.5% in June.

In 2023, the world gross domestic product will grow by just 1.7%, 1 percentage points lower than previous estimates, PTI reported.