OECD Forecasts Modest Growth for India as Global Risks Intensify

India is on track for solid economic growth over the next couple of years. According to the Organisation for Economic Co-operation and Development (OECD), the country’s GDP is expected to grow by 6.8% in 2024–25. What’s fuelling this? Substantial government investment, better crop yields, and a drop in inflation. Still, the OECD notes that global uncertainties and some significant domestic challenges could slow progress.

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Resilient Growth Despite a Shaky Global Scene

In its latest economic outlook, the OECD bumped up India’s FY25 forecast to 6.8%. Why? Big infrastructure spending and strong credit growth are helping private investments thrive. This upward trend is likely to continue, with a projected 6.9% growth in fiscal year 2026.

India also wrapped up the January–March 2025 quarter with impressive numbers, as its GDP grew by 7.4% compared to the same period last year. That’s the fastest pace in a year, thanks mainly to the booming construction and manufacturing sectors. Overall, the FY25 growth landed at 6.5%, making India the world’s fastest-growing major economy.

Inflation Cooling Off, RBI Has Room to Breathe

Inflation is starting to ease up. Consumer prices are expected to rise just 4.8% in FY25 and could fall to 4.0% by FY27. That gives the Reserve Bank of India (RBI) some breathing room for rate cuts. Assuming a normal monsoon and no unexpected disruptions in supply chains, the OECD expects the RBI to reduce policy rates by as much as 125 basis points by March 2026.

Domestic Demand: A Mixed Bag

Big spending on infrastructure and a stronger harvest season, thanks to likely good monsoon rains, should give rural incomes a boost. That, in turn, could help domestic demand. But here’s the catch: people are still holding back on spending, especially on non-essential items. Why? Job growth hasn’t been strong enough, and many consumers remain cautious.

Exports also see a slight increase, but global instability could hinder any significant gains.

The Big Picture: Global Risks and Long-Term Fixes

The OECD flags one of the biggest wildcards, rising geopolitical tensions, especially in the Middle East. These developments could disrupt trade routes and energy supplies, leading to higher prices and increased pressure on the global economy.

Back home, there is still work to be done if India wants to achieve its long-term goal of becoming a developed economy by 2047. The OECD highlights a few key areas: boosting women’s participation in the workforce, enhancing education, and reducing the labour market's dependence on informal jobs.

Final Thoughts

India’s growth prospects look solid, but it’s not all smooth sailing. Staying on this path will mean walking a careful line, keeping the economy growing while staying financially and structurally sound. Smart fiscal decisions, bold reforms, and the ability to weather global storms will be crucial to maintaining India’s momentum.