The Organisation for Economic Co-operation and Development (OECD) on Wednesday said that recession in Japan is unlikely to impact investment flow into India. But it cautioned that the Reserve Bank of India’s monetary policy stance will have to stay tight if the decline in inflation is to sustain.

Chief Economist with OECD, Catherine L Mann said that Japan is going into recession despite having financially strong companies. Her advice to India is to strategise reforms to provide opportunities for these (Japanese) companies.

“Japanese firms have a lot of money to work with. So India just has to roll out a welcome mat for them,” she said at a press meet to release the Economic Survey of India .

Data released on November 17 reveal that Japan’s GDP fell at an annualised 1.6 per cent in July-September (third quarter), after it plunged 7.3 per cent in the second quarter following a rise in the national sales tax, which hit consumer spending.

On a quarter-on-quarter basis, the economy shrank 0.4 per cent in the third quarter, following a contraction of 1.8 per cent in the second quarter.

Talking about India, Mann said that, though both producer (wholesale) inflation and consumer (retail) inflation have decreased, India’s consumer price inflation is still much higher than in the OECD area and in other BRICS (Brazil, Russia, India, China and South Africa) countries.

“The planned tighter fiscal stance should help to sustainably reduce inflation, but the stance of monetary policy will also have to remain tight,” the report said.

India’s headline inflation rate based on new Consumer Price Index fell to a record low of 5.52 per cent in October from 6.46 per cent a month ago. The RBI is targeting CPI inflation of 8 per cent by January 2015 and 6 per cent by January 2016. It will review monetary policy next on December 2.

The OECD survey said the Indian economy is likely to grow at 6.6 per cent in 2015-16 and 6.8 per cent in 2016-17. Projection for this year is 5.4 per cent.

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