The Organization for Economic Cooperation and Development (OECD) on Tuesday positively projected that one of Asia’s largest economy, India will bounce back to grow at 12.6% in FY22.
The growth projected for India will be the highest among the other G20 countries, after the detestable pandemic had pushed the economy into recession after a gap of more than 40 years.12.6% growth projection will be the fastest in the world, followed closely by China at 7.8% growth.
Additionally, India’s GDP is expected to grow at 5.4% in the following financial year. The interim outlook on Tuesday stated that this comes after the fast rebound of several large emerging-market economies at the current moment.
The interim outlook stated that “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 it was prior to the pandemic, with marked variation in the pace of recovery across economies,” .
In a special mention to the emerging economies like India, the interim outlook maintained that “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,”.
OECD has reportedly increased India’s growth estimate for FY22 by a significant 4.7% points from earlier 7.9% projected in December. Additionally, For FY21, it also revised its estimates for India’s GDP contraction as it expected the economy to contract by 8%. The recent contraction estimates have been revised to 7.4%.
The growth in FY 22 will be driven by the flattening of the covid-19 positivity curve, robust rollout of the vaccination programme, people learning to live with the new normal, and the investment-focused government spending.
Additionally, OECD also expects the global GDP to grow by a significant 5.6% in 2021, compared to 1.4% in December’s report.
The report mentioned that “Global economic prospects have improved markedly in recent months, helped by the 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,”.
Cautiously the report also added that in the current scenario the dynamics of domestic demand and trade continue to be unfavorable for small businesses or MSMEs. Policy support, therefore, should be continued for them and for the urban poor, who have borne the brunt of the pandemic.
But all is not as rosy as the indicators might show, with the rise of new variants of coronavirus, OECD said that the advanced economies, as well as vaccine suppliers like China, India, and Russia, also face a potential risk from the spread of new mutations and variants.
Recently, rating agencies had positively projected high growth numbers for India for the coming fiscal. Rating agency like Moody’s projected India’s economy to grow at 13.7% for FY22. The Reserve Bank of India and Economic Survey kept their projections modest and estimated India’s economy to grow at 10.5% and 11% respectively. The International Monetary Fund had also positively forecasted 11.5% GDP growth for the same financial year.
Laurence Boone, Chief economist at OECD stated that the global recovery will be largely led by the US, especially due to the President Joe Biden’s $1.9 trillion stimulus program.
OECD with a pinch of reality, also added that “Despite the improved global outlook, output and incomes in many countries will remain below the level expected prior to the pandemic at the end of 2022,”.