New Delhi: The Organisation for Economic Cooperation and Development (OECD) on Wednesday raised its 2009 growth forecast for India to 5.9%, revising higher a March projection of 4.3%, on expectations that the economy will gradually regain momentum. In the next calendar year, India’s gross domestic product is predicted to grow 7.2%.
The 2009 forecast by the OECD, a multilateral agency representing developed economies, matches the projection made by the World Bank on Tuesday. The World Bank, however, forecast higher growth of 8.1% for the Indian economy in 2010.
In its “Economic Outlook”, the OECD said India’s new government will face the challenge of restoring fiscal discipline, accelerating structural reforms and selling public sector assets.
“Any further easing in policy should be achieved through lower interest rates, rather than discretionary fiscal expansion,” it said in the report. It also cautioned against “growing use of protectionist measures” by India.
The OECD forecast that the Chinese economy would expand 7.7% in 2009 as against its previous forecast of 6.3%. In 2010, China’s gross domestic product, or GDP, is projected to grow 9.3%.
The OECD said the global economic downturn appears to be approaching its bottom, following the deepest decline in post-World War II history. However, it cautioned that the ensuing recovery is likely to be both weak and fragile for some time and the negative economic and social consequences of the crisis will be long-lasting.
Indian growth indicators tell that gloabl downtrun is approaching the botton. Sandeep Bhatnagar/Mint
The OECD cautioned against the temptation to hurriedly withdraw extraordinary policy measures taken in the last nine months, at early signs of economic recovery.
“Consolidation, when recovery is sufficiently firm, should aim to avoid collateral damage to economies’ long-term growth prospects. That means relying as far as possible on rolling back public expenditure that is not growth-enhancing, and when tax hikes are necessary, to concentrate on broad-based taxes that involve minimal distortion to economic decisions of producers, consumers and investors,” it said.
OECD nations include the US, the UK, Japan, Germany and France, Australia and New Zealand.