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Informist, Thursday, Dec. 5, 2024

NEW DELHI – The Organisation for Economic Cooperation and Development on Wednesday raised its forecast for India's GDP growth in 2024-25 (Apr-Mar) by 10 basis points to 6.8%, citing strong investment. The intergovernmental organisation kept India's GDP growth forecast for 2025-26 unchanged at 6.8%. 

With accelerating public infrastructure outlays, strong investment is the main driver for India's robust performance, the organisation said in its interim report on economic outlook. It had raised India's GDP growth forecast for FY25 by 10 bps to 6.7% in September, citing solid domestic demand growth. 

The organisation's projections come after recent data showed India's growth slumped to a seven-quarter low of 5.4% in Jul-Sept, sharply lower than the Reserve Bank of India's forecast of 7.0%. The OECD's growth forecast for the current fiscal year is below the RBI's projection of 7.2%. 

The intergovernmental organisation forecasts annual private consumption growth to remain strong at around 6%, as long as inflation eases. "However, external demand will provide less support in the future, as past gains in both export performance and the terms of trade diminish," it said. 

Further, OECD expects India's inflation to drop back to the RBI's 4% target by 2026. "...good sowing and a heavier-than-normal monsoon will eventually attenuate food-price pressures, ensuring that inflation will return to close to the Reserve Bank’s 4% target," it said. India's headline inflation rate surged to a 14-month high of 6.21% in October mainly because of a sequential rise in food prices. The intergovernmental organisation expects falling inflation to give the central bank space to allow some policy easing over 2025-26 to sustain activity. 

Including the states, the general government deficit should soon fall below 8% of GDP on the back of additional revenues from efforts to broaden the tax base, OECD said. It also expects the government's capital expenditure to grow almost 17% in FY25.

OECD expects export growth in India to pick up slightly, but stay weaker due to ongoing geopolitical tensions. The main macroeconomic risks come from abroad, notably a weaker economic environment and higher commodity import prices, associated with a worsening global geopolitical environment or greater protectionism, the report said. End

Reported by Pratiksha

Edited by Namrata Rao

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