Remaining one of the fastest growing economies, India is projected to see a growth of around 7.5 per cent in the current financial year even as the world economic growth is “stuck in a low-growth trap”, says OECD.
The Paris-based think tank’s estimates come a day after official numbers showed that Indian economy expanded 7.9 per cent in the latest March quarter while 2015-16 GDP expansion stood at a five-year high of 7.6 per cent.
Noting that “India remains one of the fastest growing countries”, OECD today said economic growth is projected to remain strong, hovering around 7.5 per cent.
However, as per the summary of projections by the Organisation for Economic Cooperation and Development (OECD) for G20 countries, India is expected to see a growth of 7.4 per cent in the current fiscal and rise to 7.5 per cent in 2017-18.
Releasing its latest Global Economic Outlook, OECD said the global economy is stuck in a low-growth trap that will require more coordinated and comprehensive use of fiscal, monetary and structural policies to move to a higher growth path and ensure that promises are kept to both young and old.
OECD Secretary-General Angel Gurria said growth is flat in the advanced economies and has slowed in many of the emerging economies that have been the global locomotive since the crisis.
“Weak trade growth, sluggish investment, subdued wages and slower activity in key emerging markets will all contribute to modest global GDP growth of 3 per cent in 2016, essentially the same level as in 2015… Global recovery is expected to improve only to 3.3 per cent in 2017,” OECD said.
With re-balancing continuing in China, growth is expected to continue to drift lower to 6.5 per cent this year and 6.2 per cent in 2017, supported by demand stimulus.
“India’s growth rates are expected to hover near 7.5 per cent this year and next, but many emerging market economies continue to lose momentum. The deep recessions in Russia and Brazil will persist, with Brazil expected to contract by 4.3 per cent in 2016 and 1.7 per cent in 2017,” it noted.
About India, the think tank said private consumption would be boosted by expected large increases in public wages and declining inflation. Investment would pick up gradually as excess capacity fades, deleveraging continues for corporations and banks, and infrastructure projects mature, it added.
“Inflation is above the long-term target and public debt is high, leaving little room for accommodative policies. However, some monetary impulse is to come as recent cuts in policy rates are passed on to consumers and investors.
“The renewed commitment for fiscal consolidation is welcome but the quality of public finances should be improved by increasing tax revenue and tilting the spending mix towards physical and social infrastructure,” the think tank said.
Further, OECD said improving productivity is essential for India’s GDP per capita to catch up with higher-income countries.