OECD Revises India's FY25 Growth Forecast Upward to 6.7%

OECD Revises India’s FY25 Growth Forecast Upward to 6.7%

The OECD raised India’s FY25 growth forecast to 6.7%, with inflation expected at 4.5%. India remains the fastest-growing economy globally, projected to grow at 6.8% in FY26. Strong domestic demand drives growth, but inflation may rise to 5% in the coming months.

Piyush Shukla Published On September 30th, 2024

The Organisation for Economic Co-operation and Development (OECD) raised India’s FY25 growth forecast to 6.7%, up from 6.6%, in its Interim Economic Outlook released on September 25. Inflation is projected to rise to 4.5%, compared to the earlier estimate of 4.3%. The Indian economy is expected to grow even faster at 6.8% in FY26, marking a 20 basis points increase from the May forecast. The OECD emphasized that India will remain the fastest-growing economy in 2024 and 2025, ahead of China, the US, and other G20 nations.

Global Economic Overview

The OECD noted that global output growth remains resilient, with inflation moderating. Growth has been robust in many G20 countries, including the US, Brazil, India, Indonesia, and the UK. Global GDP is projected to stabilize at 3.2% in 2024 and 2025, supported by disinflation, rising real incomes, and less restrictive monetary policy.

Domestic Demand and Inflation

Strong domestic demand has buoyed activity in India, Brazil, and Indonesia, though it has slowed in Mexico. Inflation in India is expected to gradually align with the Reserve Bank of India’s (RBI) target of 4% by FY26, despite rising to 4.5% in FY25. Consumer inflation was below 4% in July and August but is anticipated to rise to 5% in the coming months.

Risks and Reforms

The OECD warned of potential risks to growth from geopolitical and trade tensions but emphasized that rising incomes could further boost growth. The organization stressed the importance of product market reforms to promote open markets, enhance competitiveness, and foster sustained economic growth.