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Informist, Thursday, Mar. 26, 2026

 

--OECD cuts India's FY27 GDP growth forecast by 10 bps to 6.1%

--OECD retains India's FY28 GDP growth forecast at 6.4%

--OECD raises India's FY27 CPI inflation forecast by 170 bps to 5.1%

--OECD raises India's FY28 CPI inflation forecast by 10 bps to 4.1%

--OECD: Lower US tariffs to support growth in India

--OECD: Rationing of gas to disrupt some production activities in India

--OECD: Surge in global energy prices to spur inflation in India

--OECD: Expect RBI to raise policy rates temporarily in Apr-Jun

--OECD: See RBI raising policy rates in Q1 to offset inflationary pressures
 

NEW DELHI – The Organisation for Economic Co-operation and Development sees slower growth and sharply higher inflation in India because of the surge in energy prices driven by the US-Israel war on Iran. The OECD, in its interim economic outlook, said the Reserve Bank of India will have to temporarily raise interest rates in the June quarter to tackle inflationary pressures.

 

The OECD lowered its forecast for India's GDP growth in the financial year starting Apr. 1 by 10 basis points to 6.1% and retained the growth forecast for FY28 at 6.4%. The Indian economy expanded 7.8% in the December quarter, based on the new GDP series with FY23 as the base year. The government's second advance estimate has projected FY26 GDP growth at 7.6%.

 

"The decline in (US) tariffs should support growth in India, though gas rationing will disrupt some production activities and fiscal support is expected to fade," the OECD said in its report. India has faced a shortage in the supply of cooking gas prices since the outbreak of the war in West Asia and the closure of the Strait of Hormuz, a narrow waterway connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea, through which a majority of India's crude oil and gas imports pass.

 

The war and the closure of the strait have pushed up global energy prices with Brent crude oil futures rising to over $100 a barrel from around $70 a barrel before the war.

 

"In India, the fading deflationary impact of past food and energy price-reducing shocks will be exacerbated by the recent surge in global energy prices, pushing inflation up," the OECD said. The OECD sees CPI inflation rising to 5.1% in FY27, 170 bps higher than earlier forecast, from 2.0% in FY26. It then projects inflation to ease to 4.1% in FY28.

 

Inflationary pressures are seen rising to such an extent that the RBI's Monetary Policy Committee would have to raise the repo rate in the June quarter itself, the OECD said. Economists polled by Informist said the Monetary Policy Committee may have to hike policy rates but diverged on when such an action could take place. In the worst-case scenario, where the war continues through 2026, economists expect the RBI's rate-setting panel to raise the repo rate by up to 50 bps from the current 5.25% in the current calendar year.  End

 

Reported by Shubham Rana

Edited by Rajeev Pai

 

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