OECD cuts India's growth forecast to 5.4%

Paris-based think tank had earlier projected 5.7% growth rate for India

Revising its forecast downwards, Paris-based think tank Organisation for Economic Cooperation and Development (OECD) on Thursday projected a growth of 5.4 per cent for the Indian economy this year as global recovery continues at a moderate pace.

Earlier in September, it had projected 5.7 per cent growth rate for India.

"Growth will strengthen in India as investment picks up, from a 5.4 per cent rate in 2014 to 6.4 per cent in 2015 and 6.6 per cent in 2016," according to the advanced G20 release of the OECD's latest Economic Outlook.

OECD Secretary-General Angel Gurría said a number of business-friendly measures have been adopted over the past few months in India.

"Growth is strengthening in India," he said. OECD is a grouping of 34 countries. India's economic growth accelerated to 5.7 per cent in April-June quarter, much better than 4.7 per cent in the same quarter of previous financial year.

Indian government expects growth in current financial year to be between 5.4-5.9 per cent. The economy grew by sub-5 per cent in 2012-13 and 2013-14.

It said that the global economy remains stuck in low gear, but is expected to accelerate gradually if countries implement growth-supportive policies.

Widening differences across countries and regions are adding to the major risks on the horizon, it added.

"We have yet to achieve a broad-based, sustained global expansion, as investment, credit and international trade remain hesitant," said Gurría, while launching the Outlook in the run-up to the G20 Leaders' Summit that will take place on 15-16 November in Brisbane.

Financial risks remain high and may increase market volatility in the coming period, he said, adding there is an increasing risk of stagnation in the euro area.

"Countries must employ all monetary, fiscal and structural reform policies at their disposal to address these risks and support growth," Gurría said.

Global GDP growth is projected to reach a 3.3 per cent rate in 2014 before accelerating to 3.7 per cent in 2015 and 3.9 per cent in 2016, according to the Outlook.

This pace is modest compared with the pre-crisis period and somewhat below the long-term average. It is also slightly lower than the last OECD forecast in September.

Among the major advanced economies, it said that recovery remains robust in the US, which is projected to grow by 2.2 per cent in 2014 and around 3 per cent in 2015 and 2016.

"Growth in the euro area is expected to pick up slowly, from 0.8 per cent in 2014 to 1.1 per cent in 2015 and 1.7 per cent in 2016," it added.

It said China is rebalancing its economy while trying to achieve a controlled slowdown to more sustainable growth rates, and is projected to grow at about 7 per cent over the 2015-16 period, down slightly from 7.4 per cent in 2014.