OECD slashes India’s GDP forecast for FY23 to 6.6%

Organisation for Economic Co-operation and Development (OECD) recently slashed India’s GDP forecast for the current financial year (FY2023) from 6.9 per cent to 6.6 per cent in its latest economic outlook report.

key findings of the report

• The GDP forecast was cut down by the OECD because of the higher medium-term global uncertainty and slowing domestic economic activity.
• The economic growth rate has lost its momentum during the summer because of a combination of erratic rainfall, which adversely affected the sowing activities and the declining purchasing power.
• The demands are declining in services and infrastructure sectors.
• Consumers have become increasingly wary of purchasing non-essential goods and services because of high prices of food commodities and increasing energy prices.
• The tighter financial market conditions are reducing demand for capital goods.
• The current account deficit had widened in July-September quarter to 2.9 per cent of the GDP.
• The headline inflation remains above 6 per cent because of the trend of increasing price of food.
• Labour market is improving both in urban and rural regions. However, there are several signs of a wage-inflation spiral.
• Despite the falling global demand and the tightening of monetary policy, India is expected to become the second-fastest growing economy among G20 countries in FY2023.
• The GDP growth will decelerate to 5.7 per cent in FY2024 since exports and domestic demand growth are expected to moderate.
• Inflation will affect private consumption but will moderate at the end of the projection period.
• The report recommended increasing potential output growth and resilience as well as macroeconomic stability through monetary policy that is geared towards bringing down inflation. The country’s fiscal policy should be focused on debt control and must target current and capital spending.
• Improving ease of doing business and boosting skill development can boost investment and infrastructure and create more employment opportunities.