OECD pegs India’s GDP growth in current fiscal year at 7.4%

India is expected to maintain its status as the world’s fastest growing large economy with the OECD estimating the country’s real GDP growth at 7.4 per cent and 7.5 percent for 2018-19 and 2019-20 respectively.

In fact, the India GDP growth forecast of 7.5 per cent for 2019-20 is more than a percentage point higher than the 6.4 per cent growth forecast of China. “Growth is increasing, making India the fastest-growing G20 economy. Investment and exports, supported by the smoother implementation of new GST, are becoming major growth engines,” said the latest 2018 OECD Economic Outlook report, released on Thursday.

Stronger world economy

The OECD, which comprises 35 rich-member States including US, UK and Japan, expects the world economy to grow by over 4 per cent over the next year on the back of low interest rates and other support from Governments.

However, the outlook also underlines that significant risks posed by trade tensions, financial market vulnerabilities and rising oil prices loom large, and more needs to be done to secure a strong and resilient medium term improvement in living standards.

India growth story

The OECD Economic Outlook 2018 has said Indian economy is rebounding after the transitory negative impacts of demonetisation and GST.

“Reforms are gradually paying off, as confirmed by the recovery in industrial production and investment after several weak years,” said the report.

India’s GDP growth will be supported by an acceleration in private investment as excess capacity diminishes, deleveraging by corporates and banks continues and infrastructure projects mature, it said. Exports will strengthen thanks to competitiveness gains resulting from the implementation.

Also, the drag on growth from exports is vanishing as foreign demand is rising and procedures to comply with the new GST have been adjusted to ease liquidity constraints faced by exporters. Pressure on the current-account deficit are stemming from the rapid increase in imports, accompanying the recovery in import-intensive investment, and oil prices.

OECD report said that India’s current account deficit will increase. Job creation in the formal sector will remain sluggish, leaving the vast majority of workers in low-productivity, low-paid activities.

Investing more in education and training, combined with a modernisation of labour laws, would help create better jobs and make growth inclusive, OECD has said. Fiscal and monetary policies are projected to remain broadly neutral.

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