The Organization for Economic Cooperation and Development (OECD) has stated that it is expecting India’s economy to grow close to 7.5% in 2019 and 2020 as higher oil prices and rupee depreciation put pressure on demand and inflation. India’s GDP at market prices to grow 7.3% in 2019 and 7.4% in 2020 from 7.5% in 2018. It also said that the growth is likely be slow down in 2019 and 2020 mainly on account of tighter financial conditions, higher oil prices, adverse terms of trade, lower growth in partner countries, and rising political uncertainties in India and abroad.
It said that monetary policy will need to be tightened as inflation expectations are trending up and there are several upside risks to inflation. Moreover, it praised the Reserve Bank’s credibility in targeting inflation and said “the projected marginal increases in policy rates will help anchor inflation”.
Besides, on the trade front, it noted that the hike in US tariffs on Chinese imports could benefit India’s exports particularly in the textile sector. Additionally, it has projected global GDP growth to slow from 3.7% in 2018 to 3.5% in 2019-2020.