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OECD Sees India Growth a Bit Under the Weather

The Organisation for Economic Co-operation and Development (OECD) has revised its growth projections for India, anticipating a further slowdown in the coming fiscal years. The Indian economy is expected to grow at 6.3% in FY24, slightly under the 6.7% growth seen in Q2FY24. However, the outlook for FY25 is even more conservative, with a projected growth of 6.1%. This downward revision is attributed to adverse weather conditions and a globally weakened economic environment.

Factors Contributing to Slowdown

  • The OECD report points to adverse weather-related events as a significant factor affecting India’s economic performance.
  • Additionally, the global economic outlook is considered a key driver of the projected slowdown.
  • The inter-governmental group of 38 high-income economies suggests that services exports and public investment will play pivotal roles in mitigating the impact and sustaining economic activity.

Optimism for FY26

  • While expressing caution for the short term, the OECD remains optimistic about India’s growth prospects in FY26.
  • The organization forecasts a rebound, with the Indian economy expected to grow at a rate of 6.5%.
  • The anticipated factors contributing to this upturn include a decline in inflation, improved purchasing power, the conclusion of the El Niño weather pattern, productivity gains from recent policy reforms, and a more favorable global economic landscape.

Inflation Projections

  • Contrary to the current inflation rate of 4.9% in October, the OECD offers a more pessimistic view.
  • It projects a slightly higher inflation rate of 5.3% for FY25. The report suggests that as inflation progressively declines, coupled with enhanced purchasing power, the economic environment is expected to improve.

Positive Indicators

  • The report highlights positive indicators for India’s economic recovery, such as the expectation of faster-than-expected growth in Q2FY24 at 6.7%.
  • Additionally, the OECD identifies various factors, including the conclusion of the El Niño weather pattern, productivity gains from recent policy reforms, and improved global conditions, which are anticipated to contribute to strengthening economic activity.

Questions Related to Exams

Q: What are the revised growth projections for the Indian economy according to the OECD?

A: The Organisation for Economic Co-operation and Development (OECD) predicts a growth rate of 6.3% for India in FY24 and a further slowdown to 6.1% in FY25.

Q: What factors contribute to the projected economic slowdown in India?

A: The OECD attributes the anticipated slowdown to adverse weather-related events and a globally weakened economic environment. It emphasizes the importance of services exports and public investment in mitigating these challenges.

Q: Is there optimism for India’s economic growth in the near future?

A: Yes, the OECD remains optimistic about India’s economic rebound in FY26, forecasting a growth rate of 6.5%. Factors contributing to this optimism include a decline in inflation, improved purchasing power, the conclusion of the El Niño weather pattern, and global economic improvements.

Q: How does the OECD view India’s inflation trends?

A: Despite India’s October inflation rate being 4.9%, the OECD projects a slightly higher inflation rate of 5.3% for FY25. The organization expects inflation to decline progressively, contributing to improved economic conditions.

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