NEW DELHI: The Organisation for Economic Co-operation and Development (OECD) on Tuesday forecast India’s GDP grow at 12.6% in FY22, the highest among G20 countries, aided by additional fiscal support after the coronavirus pandemic pushed the economy into recession after a gap of over 40 years.
“The recovery in activity continued in the fourth (December) quarter of 2020, despite new virus outbreaks in many economies and tighter containment measures. Global output remained around 1% lower than prior to the pandemic, with marked variation in the pace of recovery across economies. The rebound has been relatively fast in several large emerging-market economies. Activity moved above pre-pandemic levels in China, India and Turkey, helped by strong fiscal and quasi-fiscal measures and a recovery in manufacturing and construction,” the grouping of developed economies said in its interim economic outlook.
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OECD raised India’s growth estimate for FY22 by 4.7 percentage points from 7.9% projected in December. For FY21, it expects the economy to contract 7.4% against an 8% decline estimated by the government statistics office.
For the global economy, OECD raised its forecast to 5.6% for 2021 from 4.2% estimated earlier. It said global economic prospects have improved markedly in recent months, helped by gradual deployment of effective vaccines, announcements of additional fiscal support in some countries, and signs that economies are coping better with measures to suppress the virus.
“Significant fiscal and monetary support continues to underpin activity. Additional discretionary fiscal measures announced in several countries during the past three months will add to the overall support this year, including in the United States, Japan, Germany, Canada, and India,” OECD said.
OECD though cautioned that advanced economies, as well as vaccine suppliers such as China, India and Russia, face potential risks from the spread of new mutations and re-imposition of containment measures from the latter half of 2021. It, however, maintained that vaccine production and deployment in these countries which is likely to be completed during 2021 will face less uncertainty in the near term.
OECD said cost pressures have begun to emerge in commodity markets due to the revival in demand and temporary supply disruptions with fear of resurgence in inflation in countries like India. “Higher commodity prices will also raise inflation in net commodity importers, such as India and Turkey,” it added.