Days after IMF chief Christine Lagarde described India as a “bright spot“ on cloudy global horizon, the Organisation for Economic Cooperation and Development (OECD) has said the country is expected to become the fastest-growing major economy over the next two years. In its `Interim Economic Assessment', the OECD has forecast Indian economy will grow 7.7% in 2015 and 8% in 2016. China is pegged to grow at 7% in both these years, even as the world economy is forecast to do moderately better than expected a few months ago.
In its previous assessment, in November 2014, the OECD had forecast 6.4% growth in 2015 and 6.6% in 2016. Part of the upward revision is due to revamp in India's GDP numbers that has bumped up growth from what was earlier estimated under the factor cost method. The new numbers follow the internationally accepted market prices based system of estimating GDP and showed that the economy expanded 6.9% in 2013-14, compared to 4.7% estimated under the earlier method.
India's own assessment is that the economy will grow between 8.1% and 8.5% in 2015-16. The statistics office has pegged the rate of growth in the current year at 7.5%. The OECD said that the recovery is actually slower than anticipated earlier.
The report also carried a warning on the pace of reforms, echoing frustration voiced by some business leaders over the lack of progress on the ground. The low oil prices and monetary easing are providing support to global growth, the OECD said.
Strong domestic demand in the United States is also benefiting other countries. The OECD projects the US will grow 3.1% in the current year and 3% in 2016.
The report warned that excessive reliance on monetary policy to prop up growth is creating financial risks without yet reviving business investment.
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