India may be back on top as the world’s fastest growing economy this year

India may be back on top as the world’s fastest growing economy this year

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India’s gross domestic product is expected to grow 12.6% during the country’s fiscal year starting in April, according to a forecast released Tuesday by the Organization for Economic Cooperation and Development.

If that level of growth is achieved, it will allow India to regain its status as the fastest growing large economy – stealing the title back from China, which the OECD expects to grow by 7.8% this year after avoiding a recession in 2020.
India’s economy recorded a 0.4% increase in gross domestic product in the last three months of 2020, ending its recession. For 2020 as a whole, the Indian economy contracted around 7%.

The OECD also released major updates to its global outlook on Tuesday, saying that “the economic outlook has improved markedly in recent months”, thanks to the introduction of coronavirus vaccines and additional stimulus announcements. The Paris-based agency also said there were signs that the recent containment measures were not affecting the economy as much as previous efforts.

“This may reflect a more careful targeting of public health measures and income support,” said the group, adding that companies and consumers have adapted to the restrictions.

The OECD now expects the world economy to grow 5.6% in 2021, compared to an estimate of just 1.4% in December.

USA may grow 6.5%

The United States economy is now expected to grow 6.5% this year, a big improvement over the previous forecast of 3.3%. The agency pointed to the effects of “strong fiscal support” of President Joe Biden’s $ 1.9 trillion stimulus package.

In Europe, where the vaccine has been slow to launch outside the UK, the OECD predicts “a more gradual recovery”. The 19 countries that use the euro are expected to see production grow 3.9%. The UK economy, which suffered a bigger blow than its European neighbors in 2020, will grow 5.1%.

But the outlook remains highly uncertain due to the pandemic. The OECD noted that vaccine campaigns are moving at different speeds around the world and there is still a chance for new mutations that resist vaccines.

It also addressed the inflation debate that is shaking markets. Investors are increasingly concerned that a strong recovery could trigger price hikes later this year, forcing central banks to raise interest rates or reduce bond purchases earlier than expected.

The OECD recognized that price pressures are increasing on some fronts.

“A faster-than-expected recovery in demand, especially from China, coupled with the scarcity of supply, raised food and metal prices considerably, and oil prices rebounded to their average level in 2019,” the document said. .

But the agency emphasized that with economies and the labor market still weak, central banks must maintain loose monetary policies that spurred the recovery, even if inflation exceeds some targets.

“Transitory factors that raise inflation do not justify changes in policy stance,” said the document.

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