The Organisation for Economic Co-operation and Development (OECD), in its latest economic outlook, has projected India’s Gross Domestic Product (GDP) growth to remain steady at just under 7% annually from 2024 to 2026. The growth will be led by fixed investment, particularly in manufacturing amid rapid increases in public infrastructure spending.
For the fiscal year (FY) 2024-25, the OECD estimates GDP growth at 6.8%. Strong investment is expected to fuel this robust performance, with accelerating public infrastructure outlays and vigorous credit growth that is aiding private investment.
Farm output is recovering, thanks to an above-normal monsoon, which is raising rural incomes and is expected to ease food prices and inflation. Export growth is projected to pick up slightly, but could be modest due to ongoing global tensions.
Annual private consumption growth also is projected to remain strong at around 6%, contingent on a continued easing of inflation. However, external demand will provide less support in the future as past gains in both export performance and the terms of trade wane. Inflation is expected to fall to the official 4% target by 2026, and the current account deficit is expected to remain small and manageable.
Key macroeconomic risks stem from external factors, such as a weaker economic environment and higher commodity import prices, associated with a worsening global geopolitical environment and greater protectionism. Competitiveness could be challenged by a comparatively less favourable tariff treatment in export markets.
Domestically, financial risks associated with small retail investor exuberance and booming derivatives trading have increased. On the other hand, India’s strong position in technology services or greater utilisation of potential female labour resources could underpin even faster growth than projected.
The article originally appeared on upstox.
