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Informist, Monday, Mar. 17, 2025

 

NEW DELHI – The Organisation for Economic Cooperation and Development has lowered India's GDP growth forecast by 50 basis points to 6.4% for 2025-26 (Apr-Mar). The intergovernmental organisation also cut the growth forecast for the next year--it now projects India's GDP growth at 6.6% in FY27 against 6.8% previously expected. 

 

India's GDP grew 9.2% in FY24 and is projected to grow 6.5% in the current year, as per the government's second advance estimate. The Reserve Bank of India has projected the Indian economy to grow 6.7% in FY26, while the Economic Survey pegged it at 6.3-6.8%.

 

The OECD, in its interim economic outlook report, said that growth in the emerging market Group of 20, or G20, economies is projected to ease. But the slowdown is projected to be less pronounced in India due to some support for export growth as it attracts new business diverted from exporting countries facing steeper tariff, the OECD said.

 

"Amongst emerging-market economies, policy interest rates are projected to remain broadly stable in Indonesia and South Africa and decline only gently in India to help maintain anchored inflation expectations and avoid disruptive capital outflows from higher-than-expected policy interest rates in the US," OECD said. 

 

OECD projects headline inflation in India easing to 4.5% in FY26, and further to 4.1% in FY27. Headline inflation fell to a seven-month low of 3.61% in February. The RBI projects FY26 CPI inflation at 4.2%.  

 

The downgrade in India's growth forecast was not a one-off, with OECD lowering the global growth projection for 2025 by 20 bps to 3.1%. The global economy is projected to have grown 3.2% in 2024.

 

The OECD lowered the growth projections for the US, the UK, and the Euro area. It forecasts US GDP growth at 2.2% in 2025, 20 bps lower than previously expected. The UK and the Euro area economies are now seen expanding 30 bps lower than previously expected at 1.4% and 1.0%, respectively, this calendar year.

 

Howver, the growth forecast for China was raised by 10 bps to 4.8% for 2025. "Recent activity indicators have begun to point to a softening of global growth prospects. Business and consumer sentiment have weakened in some countries, and indicators of economic policy uncertainty have risen markedly around the world," the report said.

 

According to OECD, the imposition of various tariffs by the US, and the retaliatory steps by various countries will have implications for the economic outlook, if sustained. "The imposition of new bilateral tariff rates and the associated increase in policy and geopolitical uncertainty will act as a drag, particularly on business investment and trade, the report said.

 

"In addition, increased trade costs are expected to feed through gradually to final goods prices, putting additional upward pressure on inflation in many countries and requiring monetary policy to remain restrictive for longer than previously expected."  End

 

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

 

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