OECD raises India’s FY25 growth forecast to 6.8%

The Organization for Economic Co-operation and Development (OECD) Tuesday raised India’s economic growth forecast for 2024-25 to 6.8% from 6.6% in May, driven by strong investment and agricultural output.

It had earlier forecast 6.7% growth for the country in its September interim outlook.

“Rapid increases in public infrastructure spending and ongoing strong private consumption growth in India are projected to sustain real GDP growth of just under 7% in 2025-26 and 2026-27,” according to the OECD Economic Outlook released on Wednesday.


India’s gross domestic product (GDP) growth slowed to a seven-quarter low of 5.4% in the second quarter of the current financial year, due to weaker manufacturing, according to the official data released last week. The economy expanded by 6.7% in the first quarter.

The OECD cited macroeconomic risks from abroad, that is, a weaker global economy and higher commodity import prices, associated with higher protectionism.

While exports will pick up slightly, it could be weaker due to the ongoing global tensions, it added.

Agricultural recovery is expected to ease food prices and inflation, though the OECD raised India’s inflation forecast to 4.8% in 2024-25, up from 4.3% in May. For 2025-26, it forecasted 4.2%.

The policy rate is expected to decline as inflation eases over the next two years, it noted.

Global outlook has also been revised upwards to 3.2% from 3.1% in May. While China’s economic growth forecast remains same at 4.9% for 2024, it has been revised to 2.8% from 2.6% for the United States.

The OECD noted a strong spending growth in countries including India, the United States, Spain, and Brazil.

“Buoyant domestic demand in India and Indonesia and the recently announced stimulus measures in China and Japan are expected to support continued strong growth in Asia,” it added.

India’s general government deficit, including states, is expected to fall below 8% of the GDP, supported by additional revenues from efforts to broaden the tax base. It will be -8.2% in 2024-25 and -7.5% in 2025-26, OECD projects.

“The business sector has experienced vigorous growth, with profits at a 15-year high relative to GDP, improving capacity utilisation and rising investment intentions,” it mentioned.

As India aims to reach the advanced economy status by 2047, it needs to address challenges such as youth employment, low female labour participation, and the expansion of social safety net and pension coverage, OECD said.