OECD retains 9 percent growth forecast for India


Paris : India and China would continue to witness "buoyant economic activity", the Organisation for Economic Cooperation and Development (OECD) said Thursday, while predicting soft landing in the US and strong recovery in Europe.

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"Recent rapid economic growth is expected to continue and be close to 9 percent, despite a poor performance from the agricultural sector," the organisation said of India in its latest Economic Outlook, which is released twice each year.

The organisation, which has the membership of 30 rich nations, said investments in India have been particularly buoyant during this expansion, contributing to a substantial increase in the economy's potential growth rate.

"Monetary and fiscal policies have both become tighter which will lead to slower growth in the non-agricultural sector," the report warned, but added that normal harvest should limit the extent of the slowdown in the whole economy.

The report said inflation, which is the main cause for worry for the government, would remain stable at 5 percent, current account would reach 2 percent of gross domestic product (GDP) and the combined fiscal deficit of the centre and states should be around 6 percent of GDP by 2008, which is in line with targets.

"With a wide-ranging programme of structural reform, it would be possible to increase potential growth above its current pace of 8-8.5 percent," it said, adding further fiscal consolidation was needed to ensure higher savings.

Twice a year, the OECD Economic Outlook analyses the major trends and examines the economic policies required to foster high and sustainable growth in member countries and some selected non-members such as China and India.