OECD raises India's FY24 growth outlook to 6.3%, but inflation pressure may continue

The Organization for Economic Co-operation and Development (OECD) has raised India”s GDP growth outlook for FY24 from 6% to 6.3%, despite prevailing inflation. This is a positive sign for the Indian economy, but inflation remains a concern.

The OECD also revised its inflation outlook for India, increasing it from 4.8% to 5.3% for the current fiscal year. India”s inflation had eased to 6.8% in August from a 15-month high of 7.4% in July. Experts believe that inflation may decline further in September, but the El Niño threat remains.

The OECD also raised its financial year 2025 inflation outlook for India from 4.8% to 4.2%.

“Inflation could continue to prove more persistent than projected, with further disruptions to energy and food markets still possible,” the OECD said, stressing the turmoil across economies.

The OECD is also supporting a restrictive monetary policy to curb inflationary pressures. However, it said that there is scope for some modest policy easing over the next year in some economies, including India, Indonesia, Mexico, and South Africa, provided inflation pressures remain well contained.

The Reserve Bank of India is likely to hold the policy rate at 6.5% in its upcoming meeting in April, with most experts penciling in a hike next fiscal. RBI expects 6.5% growth and 5.4% inflation in FY24.

On Monday, S&P Global Market Intelligence raised India”s growth forecast for FY24 to 6.6% while also revising the inflation forecast upward to 6% for 2023.

The global growth outlook also received a boost of 0.3 percentage points in 2023 to 3%, whereas next year”s number was revised downward to 2.7%.

The Euro area and China both witnessed a downward revision in growth outlook for 2023 and 2024.

“A further slowdown in China would dampen growth in trading partners worldwide and could drag down business confidence,” the OECD said.

The OECD also cautioned against elevated levels of public debt in some economies and rallied for a more efficient allocation of resources to combat climate change.

“…in order to lay the groundwork for stronger and more sustainable growth longer term, policy action is needed to enhance competition, accelerate investment in low-carbon research and development, and reduce rather than increase trade barriers,” said OECD Secretary-General Mathias Cormann.