Paris-based global agency Organisation for Economic Co-Operation and Development (OECD) has upgraded India's GDP growth forecast by 40 basis points to 6.6% for FY2024-25. The GDP forecast for FY25 also remains the same at 6.6%. “GDP growth is projected at 7.8% in FY24 and around 6½ per cent in each of the following two fiscal years,” a latest economic outlook report by OECD, which represents 37 member countries, including EU nations, the U.S. and the U.K.
At 6.6%, India will be the fastest-growing economy in the world among G20 countries in the next two years, as per the OECD's latest Economic Outlook 2024.
"In FY25, India’s GDP growth will slow to 6.6%. Fiscal consolidation, while necessary, will weigh on public investment, and be offset only partially by stronger private investment as business confidence improves. Household consumption (in particular, consumers’ discretionary demand) is not expected to accelerate, amid disappointing job creation, lukewarm rural performance, and still tight financial conditions. Stronger external demand will bring an improvement in export growth. GDP growth will remain in line with the 20-year average in FY26," OECD says in its latest report.
OECD predicts that India's monetary policy will start loosening this year. "The Reserve Bank of India (RBI) remains committed to the objective of achieving the medium-term target for CPI inflation of 4% within a band of +/- 2% while supporting growth. Assuming a normal monsoon season and no other supply shocks that may de-anchor inflation expectations, a first cut of the policy rate is projected in late 2024, with cumulative cuts of up to 125 basis points implemented before March 2026. The RBI will only switch the stance to neutral during 2025."
The agency says the FY25 budget is projected to meet the Interim Budget’s ambitious Union deficit target of 5.1% of GDP, mostly through continuing improvement in tax collection (at largely unchanged rates) and, to a lesser extent, lower outlays for defence and transportation.
Indonesia remains the second fastest-growing economy for 2024, which will expectedly grow 5.1%, the OECD data shows. The Southeast Asian country is estimated to grow 5.2% in 2025. China is expected to remain the third fastest-growing economy at 4.9% GDP growth in 2024, and 4.5% GDP growth in 2025. Among big economies, the OECD says China is expected to grow moderately, as the economy is supported by fiscal stimulus and exports.
GDP growth in the United States is projected to be 2.6% in 2024, before slowing to 1.8% in 2025 as the economy adapts to high borrowing costs and moderating domestic demand.
"The global economy is continuing to grow at a modest pace. The Economic Outlook projects steady global GDP growth of 3.1% in 2024, the same as the 3.1% in 2023, followed by a slight pick-up to 3.2% in 2025," says the OECD report.
The impact of tight monetary conditions continues to be felt, particularly in housing and credit markets, but global activity is proving relatively resilient, the decline in inflation continues, and private sector confidence is improving, OECD adds.
The OECD unemployment rate stood at 4.9% in February, close to its lowest level since 2001. Real incomes are rising in many OECD countries as inflation moderates, and trade growth has turned positive. The outlook continues to differ across countries, with weaker outcomes in many advanced economies, especially in Europe, and strong growth in the United States and many emerging market economies.
