As per the Paris-based think tank Organisation for Economic Cooperation and Development (OECD), Indian economy's growth is likely to improve marginally with its GDP at market price projected to expand by 3.4 percent in the current financial year from 3.3 percent in the previous fiscal. Presenting a somber picture of India's economic outlook, the OECD, a grouping of mostly developed nations, has said that rupee depreciation is putting pressures on inflation, public finances, corporate and banks with high external debt exposure.
By adding further, OECD said that supply side bottlenecks will continue to restrain growth adding to the inflationary pressure and the current account deficits (CAD). The WPI inflation accelerated to eight-month high of 7 percent in the month of October on y-o-y basis as against 6.46 percent in September, while, CAD widened to a record high of 4.9% of GDP in the first quarter of current fiscal. Though, OECD welcomed India's new monetary policy framework that puts more weight on inflation as a policy anchor, added that, to contain inflationary pressures the fiscal deficit is required to be reduce and supply constraints that limit growth are to be dealt with.
Moreover, OECD added that India's economic activity is expected to recover gradually on the back of implementation of infrastructure projects cleared by the Cabinet Committee on Investment (CCI), increasing exports as depreciation in rupee value has improved competitiveness of Indian exporters and clarity on political situation after the general election due in the spring 2014. OECD has pegged India's GDP growth at market price to be 5.1 percent in 2014-15 period and further rise to 5.7 percent in 2015-16 fiscal.
In order to boost economic growth, the organisation has expressed the need of strong regulatory system in the country and said that the government should give priority on reducing energy subsidies, implementing pending tax reforms, improving infrastructure and reforming the labour market. On global front, OECD expects that the pace of the global recovery will remain weak due to the worsened outlook for some emerging economies. The OECD projects world economy to grow 2.7 percent this year and accelerate to 3.6 percent in 2014.
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