OECD finds Indian economic growth 'below global trend'

The CLI, which anticipate the economic trends for six to nine months, cover various economic data

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India’s growth prospects continue to remain “below trend” even as most of the major economies are witnessing moderate improvements, Paris-based think tank Organisation for Economic Cooperation and Development (OECD) said today.

While economic activities are close to trend rates in China, growth seems to be firming up in the United States and Japan. OECD’s conclusions are based on composite leading indicators (CLI) that are designed to anticipate turning points in economic activities.      

“The CLIs for the United Kingdom, Canada, China and Brazil point to growth close to trend rates. The CLI indicates that growth is losing momentum in Russia, whereas for India, it continues to indicate growth below trend,” OECD said.      

India’s CLI stood at 97.3 in April, same as in February and March. In January, the reading was better at 97.5.

OECD said that CLIs indicate moderate improvements in growth in most major economies while the United States and Japan are seeing firming economic growth. “In the euro area as a whole, the CLI continues to indicate a gain in growth momentum. In Germany, the CLI shows that growth is returning to trend,” it noted

According to OECD Deputy-Secretary General Richard Boucher, India needs another round of reforms for better GDP growth and rid itself of unnecessary regulations to reduce corruption, “Our basic view is that India needs another round of reforms,” he said at the sidelines of the World Economic Forum (WEF) on East Asia held in Nay Pyi Taw, Myanmar.   

Asked as to what India could do to have improved economic growth, Boucher said, “India needs to do things to increase government efficiency, smoothing the way for projects, reduce regulatory burden on companies and open up some more to competition. So, we think that another round of reforms is necessary.”

“It will bring much broader benefits than opening up one specific sector. We are starting now the next economic survey of India which will come out next year. We have had some of the initial discussions and will have much more thorough discussion that will be coming out next year,” Boucher added.

Appreciating government’s decision to open up FDI in multi-brand retail, he said, “It has a lot of benefits - for farmers, consumers, supply chains and better pricing mechanism. I think that is very important.”               

On sharing of information among nations to curb tax evasion, Boucher said, “What countries are moving towards is more automatic information exchange. We have been proposing and supporting that this kind of stuff can be very helpful.”  

Also, he said, OECD is working on, and where India has been a strong contributor, is ‘Base Erosion Profit Shifting’.

The BEPS project is looking at whether, and if so why, the current rules allow for the allocation of taxable profits to locations different from those where the actual business activity takes place.

The OECD is a grouping of mostly rich nations.      India’s economic growth slowed to a decade-low of five per cent in the last financial year from 6.2 per cent in the 2010-11 period.