The Organisation for Economic Co-operation and Development (OECD) on Wednesday raised India’s gross domestic product (GDP) growth forecast to 6.8% from 6.7%, citing rapid increases in public infrastructure spending and ongoing strong private consumption growth.
“GDP is expected to grow by 6.8% in fiscal year 2024-25, and this momentum is set to be sustained at similar rates throughout FY25 and FY26,” it said in a report. After the GDP rose by 5.4% in July-September year-on-year, the lowest in seven quarters, analysts feared that FY25 growth may come in below 6.5%.
Strong investment is the main driver of this robust performance, with accelerating public infrastructure outlays, OECD said. “Vigorous credit growth is supporting private investment. Farm output is recovering as an above-normal monsoon is lifting rural incomes, and will soon ease food prices and inflation,” it said.
Export growth is projected to pick up slightly, but could be weaker, given ongoing global tensions, it said. Eventual disinflation will create space for monetary policy easing, it said adding that fiscal policy settings are prudent, with the general government deficit and debt on persistent downtrends, despite higher public investment.
“Labour supply is becoming a challenge for sustaining rapid GDP growth. Facilitating further structural shifts out of agricultural employment, including through improvements in educational attainment will be key. Also, greater focus is needed on fighting informality, boosting youth employment and raising female labour force participation,” it said.
The main macroeconomic risks stem from abroad, notably a weaker economic environment and higher commodity import prices, associated with a worsening global geopolitical environment or greater protectionism. Competitiveness losses from comparatively less favourable tariff treatment in export markets could also prove more harmful, it cautioned.
