India will continue to grow at near 7 percent growth rates over the next two years, as strong investment and recovery in farm output help sustain the momentum, Organisation for Economic Co-operation and Development (OECD) said on December 4 at the launch of its new economic outlook.
“Strong investment is the main driver of this robust performance, with accelerating public infrastructure outlays. Vigorous credit growth is supporting private investment. Farm output is recovering as an above-normal monsoon is lifting rural incomes, and will soon ease food prices and inflation. Export growth is projected to pick up slightly, but could be weaker, given ongoing global tensions,” OECD said in a report on December 4.
The report, which likely does not take into account the recent GDP growth data released by the government, increased India’s growth forecast to 6.8 percent, compared with 6.7 percent in the September version of the report.
The 38-member grouping of developed economies noted that the Indian economy was strong and would average 6.8 percent growth over the next three years.
The organisation also revised India’s FY26 growth forecast to 6.9 percent, up from the 6.8 percent projected in the September outlook.
The OECD forecast comes as India’s economic growth fell to a seven-quarter low of 5.4 percent in the second quarter of the year, prompting economists to revise their growth forecast downwards.
Some have pointed out that India’s growth may not even cross 6.5 percent in the current fiscal.
Inflation predictions
The grouping of rich countries predicted India's inflation to ease to 4.8 percent in FY25 and further to 4.2 percent and 4 percent over the next two fiscals.
“Eventual disinflation will create space for monetary policy easing. Fiscal policy settings are prudent, with the general government deficit and debt on persistent downtrends, despite higher public investment,” it said.
However, the organisation noted that India will need to carry out further reforms to reach advanced economy status by 2047.
“Eventual disinflation will create space for monetary policy easing. Fiscal policy settings are prudent, with the general government deficit and debt on persistent downtrends, despite higher public investment,” OECD said.
Global growth is expected to stay resilient OECD said despite significant risks. It forecasts growth to average 3.3 percent over the next three years.
“Significant challenges remain. Geopolitical tensions pose short-term risks, public debt ratios are high and medium-term growth prospects are too weak. Policy action needs to safeguard macroeconomic stability – through monetary policy easing that is carefully calibrated to ensure inflationary pressures are durably contained and through fiscal policy that rebuilds fiscal space to preserve room to meet future spending pressures," said OECD Secretary-General Mathias Cormann.
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