OECD slashes India growth forecast to 9.4% for current financial year
OECD projected the economy to grow at 8.1% in FY23, before moderating to 5.5% in FY24
PremiumNEW DELHI : The Organisation for Economic Co-operation and Development (OECD) on Wednesday pared its growth forecast for India from 9.7% estimated earlier to 9.4% for this fiscal even as it maintained that the ongoing economic recovery is gaining traction, supported by progress in vaccination, which is boosting consumer sentiment.
In September, while paring India’s FY22 growth projection from 9.9% to 9.7%, OECD had citied still persisting risk of lasting costs from the pandemic.
The 38-member intergovernmental organization has projected the Indian economy to grow at 8.1% in FY23, and moderate to 5.5% in FY24.
“In the medium term, however, uncertainty over employment and earnings prospects will slow down the revival of households’ consumption. Growth, moreover, will be uneven: rural areas are struggling to absorb the huge flows of migrant returnees, while on the supply side the buoyancy of manufacturing boosted by the Production-Linked Incentive scheme contrasts with the slow return to normalcy of contact-intensive services. The economic outlook in FY 2023-24 is projected to deteriorate due to the lingering negative legacy of covid-19 on key growth-drivers such as business investment in new machinery," it said.
OECD asked the government to put in place a credible medium-term fiscal strategy to bring down the debt-to-GDP ratio and create the fiscal space to meet multi-faceted development needs.
“At the recent COP26, India pledged to reach net zero by 2070 and to produce half of its energy from renewable resources by 2030. In this regard, investment needs to upgrade the power grid and scale up the share of renewables in installed capacity are huge and require a co-ordinated institutional framework and supportive regulation to attract capital," it said.
According to OECD, low-skilled domestic migrants and urban workers, who faced the brunt of employment shocks in both waves of the pandemic in India, have yet to see their earnings return to pre-pandemic levels.
“India has made remarkable progress over the past two decades in accelerating economic growth and making a dent in poverty. Improving social policy delivery and targeting it better are now fundamental challenges to heal the scars left by the pandemic," it said.
Chief economic adviser K. Subramanian had told reporters on Tuesday that India was likely to have double digit growth in FY22, 6.5-7% next year and over 7% growth thereafter.
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