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The Organisation for Economic Co-operation and Development (OECD) has recently revised India's growth forecast, projecting it to be 6.4% for FY26 from the earlier estimate of 6.9%. Growth for FY27 has also been trimmed to 6.6% from 6.8%. Despite the downgrade, India is expected to remain the fastest-growing major economy over the next two years. The OECD's outlook remains less optimistic compared to the Reserve Bank of India (RBI), particularly concerning inflation projections and trade uncertainties, even as global economic resilience offers a mixed picture.
The Organisation for Economic Co-operation and Development (OECD) reduced India's growth forecast to 6.4% for FY26, down from its previous estimate of 6.9%. The 38-member bloc of advanced economies cited heightened uncertainty as a key reason for its cautious outlook. Advertisement
For FY27, the OECD also revised India's growth projection, lowering it to 6.6% from 6.8% estimated earlier. Nevertheless, the government might find some relief as economic growth is anticipated to edge up from 6.3% in the ongoing fiscal year to 6.4% in the following one.
The OECD's latest outlook appeared to be less confident than the Reserve Bank of India's (RBI) assessment of the country's growth potential. In its February report, the RBI's monetary policy committee had maintained its growth forecast at 6.7% for FY26. Furthermore, the Economic Survey had estimated growth to range between 6.3% and 6.8% for FY26.
India is still expected to retain its position as the fastest-growing major economy over the next two years, according to the OECD's projections.
OECD Secretary-General Mathias Cormann commented that the global economy had demonstrated considerable resilience, with stable growth and declining inflation. However, he noted that certain weaknesses had begun to surface, largely due to intensified policy uncertainties.
On the inflation front, the OECD remained more cautious compared to the RBI. It projected inflation to be at 4.5% in the upcoming fiscal year, an increase from the previously estimated 4.2%, which was in line with the RBI's forecast. Cormann pointed out that increasing trade restrictions were likely to push up costs for both production and consumption. He stressed the importance of ensuring a well-functioning, rules-based international trading system and maintaining open markets. Looking further ahead to FY27, the OECD expects inflation in India to ease, falling to 4.1%.
While the OECD has revised India's growth projections downwards for the next two fiscal years, it has reaffirmed the nation's status as the fastest-growing major economy. The divergence between the OECD's and RBI's outlooks highlights contrasting perspectives on India's economic trajectory, particularly in terms of growth and inflation. The government's focus will likely remain on maintaining stability while navigating potential risks in the global economic landscape.
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