The global economy is headed for a slowdown largely as a result of the shockwaves from the Russia-Ukraine conflict and India is among a few countries to continue on a growth trajectory, latest analysis by the Organisation for Economic Cooperation and Development (OECD) revealed this week.
The Paris-headquartered intergovernmental body that focuses on economic policy reports in its latest ‘Economic Outlook’ that India is set to be the second-fastest growing economy in the G20 in FY 2022-23 behind Saudi Arabia, despite decelerating global demand and the tightening of monetary policy to manage inflationary pressures. The GDP in the country, the measure for economic growth, will slow to 5.7 per cent in FY 2023-24 as exports and domestic demand growth moderate, but it would mean it would still be growing more than many of other G20 economies including neighbouring large Asian economy China.
The report forecasts: “After hitting 6.6 per cent in FY 2022-23, GDP growth is expected to slow in coming quarters, to 5.7 per cent in FY 2023-24, before reverting to around 7 per cent in FY 2024-25.
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“CPI [Consumer Price Index] inflation will remain above the central bank’s upper limit target of 6 per cent at least until early 2023 and then gradually recede as higher interest rates take effect… Offsetting these forces, at least partially, some improvements can be expected as more contact-intensive services sectors normalise, including international tourism once borders are fully open and restrictions lifted.”
The OECD highlights India’s “impressive progress” in recent years in extending access to financial services to a larger portion of the population, including disadvantaged socio-economic groups by leveraging the country’s competitive strength in information and communications technology (ICT), the Unified Payments Interface (UPI) and other tools, which are easing the transition towards a cashless economy.
At a global level, the OECD projects that if the global economy avoids a recession, it would be thanks to some of Asia’s biggest economies such as India. Global GDP is projected to grow by 3.1 per cent this year, and by just 2.2 per cent in 2023. The UK is projected to be among the worst hit of all G20 nations, with only war-hit Russia registering a worse outcome.
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Álvaro Santos Pereira, OECD Chief Economist, notes: “We are currently facing a very difficult economic outlook. Our central scenario is not a global recession, but a significant growth slowdown for the world economy in 2023, as well as still high, albeit declining, inflation in many countries.
“Risks remain significant. In these difficult and uncertain times, policy has once again a crucial role to play: further tightening of monetary policy is essential to fight inflation, and fiscal policy support should become more targeted and temporary. Accelerating investment in the adoption and development of clean energy sources and technologies will be crucial to diversifying energy supplies and ensuring energy security.”
Info: Economic Outlook, OECD