OECD Forecasts Higher Growth for India Amid Global Economic Resilience The report anticipates India's growth to further increase to 6.8 per cent in FY 2025-26, up by 20 basis points from its earlier forecast.
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India's economy is set to grow at a faster pace of 6.7 per cent in FY 2024-25, an upward revision from the previously projected 6.6 per cent, according to the Organisation for Economic Co-operation and Development's (OECD) report, Interim Economic Outlook. The report also anticipates that India's growth will further increase to 6.8 per cent in FY 2025-26, up by 20 basis points from its earlier forecast.
The OECD's report highlights that global output growth has shown resilience, with inflation gradually moderating across key economies. "Global output growth has remained resilient and inflation has continued to moderate. Growth has been relatively robust in many G20 countries including the United States, Brazil, India, Indonesia and the United Kingdom. In contrast, outcomes have remained soft in a few economies, including Germany, and output contracted in Argentina," the report noted. In contrast, Germany and Argentina continue to experience softer economic outcomes, with the latter seeing a contraction in output.
India remains a standout in terms of growth among major emerging market economies, maintaining its position as the fastest-growing large economy in the world. The robust domestic demand in India, alongside Brazil and Indonesia, has been pivotal in driving economic activity, while countries like Mexico have seen momentum slow in recent months.
The report also pointed to the divergent patterns in emerging markets. In China, industrial production has been bolstered by strengthening exports, but consumer demand continues to lag amid a prolonged correction in the real estate sector. This starkly contrasts with India's buoyant demand, underpinned by rising incomes and increased consumer activity.
Inflation Outlook and Risks
On the inflation front, the OECD projects prices in India to rise by 4.5 per cent in FY 2024-25, a slight uptick from its earlier estimate of 4.3 per cent. However, inflation is expected to inch closer to the Reserve Bank of India's (RBI) target of 4 per cent by FY 2025-26. This comes as consumer inflation in India remained below 4 per cent in July and August, thanks to favourable base effects, although economists predict a rise to 5 per cent in the coming months.
The OECD also cautioned that geopolitical and trade tensions could pose risks to India's economic outlook. However, the report was optimistic, stating that rising incomes and strong domestic demand could further bolster the country's growth trajectory.
Stronger-than-expected trade resilience, driven by an upturn in U.S. import growth and greater trade dynamism in key emerging markets, including India, has been a key factor behind the global economy's steady performance. The OECD noted that equity markets, including in India, Brazil and South Africa, have shown strength, though volatility spiked briefly in August due to unexpectedly weak economic data.
While some advanced economies have seen credit growth recovery, tight lending standards continue to pose challenges. Nevertheless, India's solid domestic demand is expected to drive steady growth over the next two years, with GDP projected at 6.7 per cent for FY 2024-25 and 6.8 per cent for FY 2025-26.
