OECD raises India’s FY24 GDP growth projection to 6.3%

The Organisation for Economic Cooperation and Development (OECD) has raised India’s gross domestic product (GDP) growth projection for financial year 2024 to 6.3 per cent, up from the previous estimate of 6 percent.

India, which is listed among the G20 emerging-market economies, has experienced mostly positive growth surprises, attributed in part to favourable weather-related agricultural outcomes, OECD said. The global economy, however, is expected to grow at a rate of 3 per cent in 2023, before slowing down to 2.7 per cent in 2024, according to the report.

“A disproportionate share of global growth in 2023-24 is expected to continue to come from Asia, despite the weaker-than-expected recovery in China,” the OECD report noted.

The OECD has also revised India’s inflation projection to 5.3 per cent, up from the previous estimate of 4.8 per cent in June. The report observed that while headline inflation had decreased in many countries due to declining food and energy prices in the first half of 2023, core inflation had not experienced a significant slowdown.

“A key risk is that inflation could continue to prove more persistent than expected, which would mean interest rates need to tighten further or remain higher for longer,” the report said. 

The report added that there was room for modest policy easing in several major economies, including India, Indonesia, Mexico, and South Africa, over the next year.

The report has, meanwhile, revised India’s GDP growth projection for FY25 downward to 6 per cent from the earlier projection of 7 per cent.

The OECD recommended a cautious approach to monetary policy until clear signs of lasting relief from inflationary pressures emerge. It also emphasised the need for fiscal policy to prepare for future spending pressures.

The OECD advised that concerns about economic security should not deter governments from capitalising on opportunities to reduce trade barriers, particularly in the service sectors. “Lowering trade restrictions would boost productivity and growth,” OECD report said.