India's economic growth is projected to remain "strong and stable" at 7.3 per cent in 2015 on the back of revival in investments.
India’s economic growth is projected to remain “strong and stable” at 7.3 per cent in 2015 on the back of revival in investments even as more reforms are needed to reduce uncertainties over taxation norms, Paris-based think tank OECD said today.
Projecting a higher growth rate of 7.4 per cent for 2016, OECD said decline in oil prices would reduce pressures on the current account deficit, inflation and subsidies.
The think tank’s projection came a day after the Reserve Bank of India (RBI) flagged concerns about monsoon and inflation that would have an impact on economic growth.
“Growth in India is expected to remain strong and stable in 2015 (at 7.3 per cent) and 2016 (7.4 per cent). The recessions in Russia and Brazil are projected to give way to low but positive growth in 2016,” the Organisation for Economic Cooperation and Development (OECD) said.
Releasing its latest Economic Outlook report, it said that India’s economic growth will remain high, supported by a revival in investment.
In November last, the grouping had projected Indian economy to expand 6.4 per cent and 6.6 per cent in 2015 and 2016, respectively.
However, today’s projection is less than the GDP growth forecast of 7.7 per cent for 2015 and 8 per cent for 2016 made by OECD in its Interim Economic Assessment report released in March this year.
Meanwhile, India has overtaken China to become the world’s fastest growing economy by clocking 7.5 per cent GDP for the March quarter. In 2014-15, economy grew 7.3 per cent, as per figures released by Central Statistics Office last month.
OECD, which is a grouping of 34 countries, said that investment failed to rebound in 2014, reflecting poor infrastructure and delays in administrative procedures.
“To revive corporate investment, further reforms are needed to reduce uncertainties surrounding land acquisition and tax regulations and to improve the quality of electricity and transport systems,” it said.
The FY 2015-16 fiscal consolidation target has been relaxed to allow for increased infrastructure investment while structural reforms to improve the ease of doing business and the Make in India initiative should boost corporate investment, OECD added.
While export growth would be held back by the currency appreciation, it said decline in oil prices would reduce pressures on current account deficit, inflation and subsidies.
“The reduction in inflation expectations provides room for monetary easing. Addressing non-performing loans would strengthen monetary policy transmission,” it noted.
Meanwhile, OECD lowered its global growth forecast to 3.1 per cent for this year and to 3.8 per cent for 2016.
In November last, the grouping had projected the world economy to expand 3.6 per cent and 3.9 per cent in 2015 and 2016, respectively. According to OECD, improved public spending efficiency and increased revenue are required to fund needed public investment in physical and social infrastructure in India.
“Fiscal consolidation would also make room for the authorities to reduce requirements on banks to hold government bonds, which would release funds for private credit.
“Subsidy to food, fertiliser and oil products should be better targeted, and the envisaged sales tax (GST) and corporate tax reforms should be implemented swiftly,” the report said.
Global growth is expected to pick up through 2015 and 2016 thanks to low oil prices, widespread monetary easing and a reduction in the drag from fiscal consolidation in the major economies, the report said.
OECD has cut the growth forecast for Chinese economy to 6.8 per cent this year and to 6.7 per cent in 2016 as services replace manufacturing and real estate investment as main drivers of growth for the Chinese economy.
“US GDP growth is projected to be 2 per cent in 2015 and 2.8 per cent in 2016, a downward revision from the November 2014 forecast of 3.1 per cent this year and 3 per cent in 2016,” the report said.