The Organisation for Economic Co-operation and Development (OECD) on Tuesday projected India’s economy to sharply rebound after plunging into recession earlier this year.
In its latest interim economic outlook report, OECD estimates India’s GDP growth to rebound 12.6 percent in the financial year 2021-22, ahead of China’s 7.8 percent. If the global body’s growth projection proves accurate, India will again become the fastest-growing economy in the world — a tag that it had lost a few years ago.
The global body’s GDP projection for India in FY22 is also the highest among all G20 countries.
|G20 countries: FY 22 GDP growth projections|
S Korea: 3.3%
S Africa: 3%
In its outlook, OECD has highlighted strong fiscal measures taken by the Indian government to tackle the economic impact of the pandemic.
“The recovery in activity continued in the fourth quarter of 2020, despite new virus outbreaks in many economies and tighter containment measures. The rebound has been relatively fast in several large emerging-market economies. Activity moved above pre-pandemic levels in China, India and Turkey, helped by strong fiscal and quasi-fiscal measures and a recovery in manufacturing and construction,” OECD said in its latest interim economic outlook.
While OECD forecasts India’s economy to contract 7.4 per cent in the current fiscal year, it has revised the country’s growth estimate for FY22 upwards by 4.7 per cent from 7.9 per cent in December.
It has also revised India’s growth estimate for the following financial year (FY23) to 5.4 per cent in view of the faster recovery staged by emerging market economies.
While OECD praised additional discretional fiscal support measures announced by India, it does offer a word of caution about the long-term economic impact of the pandemic. It said additional financial support will be needed in case the recovery is disrupted by another wave of Covid-19 or hurdles like inflation.
In terms of the global economy, OECD raised its GDP forecast to 5.6 per cent in 2021-22, up from 4.2 per cent it had estimated earlier.
OECD said that the global rebound from the pandemic has been faster than expected due to effective vaccine deployment, demand creation and additional fiscal initiatives rolled out by governments around the world.