India expected to grow faster at 6.2% in FY25: OECD

Strong investment growth is likely to push India’s economy to grow faster at 6.2% in FY25 compared with 6.1% projected earlier, the Organisation for Economic Co-operation and Development said Monday.

The inter-governmental group of 38 high-income economies expects the Indian economy to grow 6.7% in the current year, in line with the International Monetary Fund’s estimate of 6.7% growth but lower than the first advance estimate of 7.3%.

“The emerging-market (EM) economies have generally continued to grow at a solid pace, despite tighter financial conditions, reflecting the benefits of improved macroeconomic policy frameworks, strong investment in infrastructure in many countries, including India, and steady employment gains,” the outlook notes.

For 2025-26, the OECD has kept its growth forecast for India unchanged at 6.5 percent. The outlook notes that high-frequency activity indicators generally suggest a continuation of recent moderate growth, with business surveys pointing to stronger activity developments in services than in manufacturing.

“Across countries, there continue to be clear signs of strong near-term momentum in India, relative weakness in Europe, and mild near-term growth in most other major economies,” the outlook notes.

On inflation, the report notes that in the EM economies, it is projected to remain generally higher than in the advanced economies while easing gradually through FY25. Tighter monetary policy and energy and food price cycles have also been the key drivers of inflation in many of these economies.

“In Brazil, India, Indonesia, Mexico, and South Africa, inflation is projected to continue easing and converge on or towards central bank targets by the end of 2025,” it says.

Earlier last week, the economic division of the finance ministry in its review of the economy said that the Indian economy is expected to expand at around 7 percent in FY25, marking the fourth consecutive post-pandemic year for the Indian economy to register growth at or over 7 percent.

“It now appears very likely that the Indian economy will achieve a growth rate at or above 7 percent for 2023-24, and some predict it will achieve another year of 7 percent real growth in FY25 as well. If the prognosis for FY25 turns out to be right, that will mark the fourth year post-pandemic that the Indian economy will have grown at or over 7 percent. That would be an impressive achievement, testifying to the resilience and potential of the Indian economy. It augurs well for the future,” the review noted.

At a global level, the OECD projects gross domestic product growth to ease to 2.9 percent in 2024, from 3.1 percent in 2023, before recovering to 3 percent in 2025 as financial conditions ease.