OECD | India OECD cuts down India's FY23 growth to 6.9 pc amid inflation
The organisation for Economic Cooperation and Development has slashed India's growth projection for this fiscal year (FY23) to 6.9 percent, down sharply from 8.1 percent estimated previously and the Reserve Bank's 7.2 percent anticipated rise.
In 2021-22 (April 2021-March 2022), India GDP grew 7 percent, positioning the country among the top few fastest-growing major economies.
OECD said India will grow 6.2 percent in FY 2023-24, despite pick-up in corporate investment pushed by Product Linked Investment schemes launched by the government in various key sectors to boost domestic manufacturing, job creation and reduce or eliminate dependence on exports.
"After recording the strongest GDP rebound in the G20 in 2021, the Indian economy is progressively losing momentum as inflationary expectations remain elevated due to rising global energy and food prices, monetary policy normalises and global conditions deteriorate," OECD said in the report.
The Paris-based organisation recommended to RBI to "gradually move towards a more neutral monetary stance" to deal with the financial and social costs of high inflation.
It is noteworthy that India is growing at 6.89 percent as of June 2022, according to OECD. It is the second fastest growing major economy after Saudi Arabia, which is growing at 7.83 percent.
"The government should counter signs of a rapid deterioration in living standards with income support for vulnerable households," OECD said, and warned that risks include the appearance of a new Covid variant, failure to tame inflation, a reversal of capital flows to emerging markets, and a significant widening of the current account deficit.
OECD said consumption growth has slowed in India with sales of two-wheelers falling to a 10-year low, subdued private sector credit growth and contracting employment, although companies report difficulties in filling vacancies.
"Consumer price inflation for energy-related items and edible oils started trending up even before the Ukraine war and has accelerated afterwards...Inflation has also risen and become wide-ranging," it said.
Meanwhile, OECD projected the UK economy to grow by 3.6 percent this year(Jan-Dec 2022), followed by 0 percent growth next year.
The euro zone, the 19-nation region that shares the euro, will grow 2.6 percent in 2022 (calendar year), it said.
The United States does not differ much with the euro zone in terms of their economic outlooks. The OECD said the U.S. was seen expanding by 2.5 percent this calendar year. It will slow to 1.2 percent in 2023 (calendar year), down from previous forecasts of 3.7 percent and 2.4 percent growth, respectively.
The world economy is set to grow 3 percent this year, much less than the 4.5 percent expected when the Organisation for Economic Cooperation and Development last updated its forecasts in December.
Growth will then slow further next year, easing to 2.8 percent, down from a previous forecast of 3.2 percent, the Paris-based policy forum said in its latest Economic Outlook.
"Russia's war is indeed posing a heavy price on the global economy," OECD Secretary-General Mathias Cormann told a news conference.
"Global growth will be substantially lower with higher and more persistent inflation," he said.
The OECD was not forecasting recession although there were numerous downside risks to the outlook, he added.
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