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The Organization for Economic Co-operation and Development (OECD) in its latest Economic Outlook has projected India’s growth at 6% for FY 2023-24. It said weak global demand and the effect of monetary policy tightening to manage inflationary pressures will constrain the economy in FY 2023-24. It also said Moderating inflation and monetary policy easing in the second half of 2024 will help discretionary household spending regain momentum. This, along with improved global conditions, will help economic activity to accelerate, with growth of 7% in real GDP in FY 2024-25.

In India, the fiscal position is projected to improve, helped by greater tax compliance, fewer subsidies and ongoing privatisation of state-owned enterprises. This should be coupled with steps to strengthen revenue mobilisation, further improve public financial management and enhance expenditure efficiency. The report said with slower growth, inflation expectations, housing prices and wages will progressively moderate, helping headline inflation converge towards 4.5%. This will allow interest rates to be lowered from mid-2024. The trade restrictions (including export bans on various rice varieties) imposed in 2022 to fight inflation are assumed to be withdrawn. The current account deficit will narrow, reflecting abating import price pressures.

The report also said despite an impressive growth and development record, daunting challenges remain. Creating good jobs is the most promising pathway to reduce poverty, which is particularly high in the female population. Increasing investment in education and vocational training, and updating labour laws, would help to achieve this objective. India is particularly vulnerable to extreme heatwaves and must make progress in mobilising resources for investment in the green economy.