OECD slashes India growth forecast to 9.4% for FY22

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Bringing down its growth forecast from 9.7 percent to 9.4 percent for FY22, the Organisation for Economic Co-operation and Development (OECD) maintained that the economy is positively recovering and gaining traction, thanks to booming consumer sentiment and speedy vaccination coverage across the country.

Notably, the 38-member intergovernmental organisation earlier pared the country's FY22 growth projection to 9.7 percent from its earlier estimate of 9.9 percent, citing the persisting risks of the lingering after-effects of the COVID-19 pandemic.

“India has made remarkable progress over the past two decades in accelerating economic growth and making a dent in poverty. Improving social policy delivery and targeting it better are now fundamental challenges to heal the scars left by the pandemic," the report mentioned.

For FY23, the country is projected to grow at around 8.1 percent, with the rate slightly brought down to 5.5 percent for FY24. This deterioration has been attributed to the enduring negative legacy of the pandemic on key parameters like investment in new machinery and more.

However, Chief Economic Adviser K. Subramanian presented a more positive growth outlook for the year, anticipating double-digit growth in FY22, 6.5-7 percent growth in the next year and over 7 percent growth thereafter.

Per the organisation, the most affected section of the society still remained the domestic migrants and urban workers, who are yet to recover from the earnings and employment loss they received in the wake of the two devastating waves of the pandemic experienced by India.

In order to sustain the growth momentum, OECD asked the government to develop a credible medium-term fiscal strategy in order to bring down the debt-to-GDP ratio, in addition to creating a solid fiscal space that effectively meets the multi-faceted development needs of the Indian citizens, which, the report suggests, will be marred by uncertainty over employment and earning prospects in the medium term.

“Growth, moreover, will be uneven: rural areas are struggling to absorb the huge flows of migrant returnees, while on the supply side the buoyancy of manufacturing boosted by the Production-Linked Incentive scheme contrasts with the slow return to normalcy of contact-intensive services," the report continued.

Recently, during the COP26, India pledged its participation in reaching net zero by 2070, along with producing half of its energy from renewable resources by 2030. In order to achieve the same, supportive regulation, synchronised framework and heavy investments are prerequisites to upgrade and scale up the power grid and renewable energy production.