More Stories

Informist, Tuesday, Dec. 2, 2025

 

--OECD retains India's FY26 GDP growth forecast at 6.7%, FY27 view at 6.2%

--OECD sees India's FY28 GDP growth at 6.4%

--OECD cuts India's FY26 CPI inflation forecast by 100 bps to 1.9%

--OECD cuts India's FY27 CPI inflation forecast by 50 bps to 3.4%

--OECD: Monetary policy easing, GST cuts to support India's growth

--OECD: Room for more rate cuts in India as inflation below target

--OECD: See Indian central govt's fiscal deficit at 4.5% in FY26

--OECD: GST changes to cut India's fiscal revenue by 0.1% of GDP in FY26

 

NEW DELHI – The Organisation for Economic Co-operation and Development has retained its forecast for India's GDP growth in the current financial year ending March at 6.7% and for FY27 at 6.2%. Monetary policy easing and the overhaul of the goods and services tax regime are expected to support growth in India, the OECD said Tuesday. It has projected the country's GDP growth in FY28 at 6.4%.

 

"In India, growth is anticipated to be supported by rising real incomes, monetary policy easing and strong growth in public capital spending," the OECD said in its economic outlook report. However, the 50% tariff imposed by the US on India will weaken export growth, it said.

 

Weaker export growth due to the US tariffs is expected to dent India's GDP growth in FY26 by about 40 basis points and by about 30 bps in FY27, the OECD said. On the other hand, the launch of the GST reform in September could boost growth by 10 bps, the OECD said.

 

"Growth is projected to recover in subsequent years as the temporary effects of higher US tariffs dissipate and the efficiency gains from the GST reform materialise fully," it said. Rising real incomes on the back of low inflation and GST cuts will support private consumption, the OECD said, adding that declining borrowing costs and strong public capital expenditure will sustain buoyant investment. For sustained growth, India needs infrastructure, education, and trade reforms, the OECD said.

 

India's GDP grew quicker than expected for the second consecutive quarter in Jul-Sept at 8.2%. Economists have raised their growth forecasts for FY26 to around 7.5% from near 7.0?rlier. In October the Reserve Bank of India projected FY26 GDP growth at 6.8% but it is expected to raise the forecast this Friday, when the Monetary Policy Committee's interest rate decision is announced.

 

Economists had earlier said the Monetary Policy Committee will lower the repo rate at the upcoming meeting from the current 5.50% but expectations are now split between a rate cut and a status quo after the higher-than-expected September quarter GDP print. The OECD said that there is further room for rate cuts in India as CPI inflation remains below the RBI's 4% target but it did not mention if it expects a cut in the December meeting. "If inflation remains within the target range and inflation expectations remain well anchored, the policy rate could gradually decline toward 5% by fiscal year 2026–27," it said.

 

The OECD has lowered its CPI inflation forecast for the current financial year by 100 bps to 1.9% and by 50 bps to 3.4% for FY27. CPI inflation fell to a record low of 0.25% in October and the RBI expects it to average 2.6% in FY26. "As base effects from favourable food and energy price shocks fade, headline inflation is expected to gradually converge to core inflation, reaching around 4% in FY2026-27," the OECD said. It has projected FY28 CPI inflation at 4.0%.

 

"Risks are broadly balanced. On the upside, successful negotiations with the United States to roll back the recently imposed tariffs would ease trade uncertainty, improve confidence and bolster manufacturing exports," the report said. "On the downside, higher oil import prices could raise inflation, weighing on private consumption and industrial production."

 

The OECD expects the central government's fiscal deficit to fall to 4.5% of GDP in FY26 from 4.9% of GDP a year ago. This would be higher than the government's fiscal deficit target of 4.4% of GDP for the year. Fiscal deficits are expected to remain broadly constant over the following years, the OECD said, with GST reforms expected to reduce revenues and slow the fiscal consolidation process despite its positive impact on demand.

 

The GST changes--in which the tax rates were reduced on hundreds of items and four rate slabs were lowered to two--is expected to reduce fiscal revenues by around 0.1% of GDP FY26 and 0.2% of GDP per year in the following years, the OECD said. "This will likely be offset by higher revenues from the pick-up in GDP growth and the positive impact of tax code simplification and digitalisation on compliance, as well as lower expenditure on subsidies," the OECD said.

Overall tax revenues are projected to increase by 0.3% of GDP, while total spending is set to decline by 0.1% of GDP, the report said. "The broadly neutral fiscal stance balances support to growth in the face of global trade headwinds with the need to rebuild fiscal buffers and bring public debt on a more prudent path."  End

 

Reported by Shubham Rana

Edited by Ashish Shirke

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.