OECD says India?s real GDP projected to grow by 6.3% in this fiscal year

Organization of Economic Co-operation and Development or OECD has stated in a latest update today that India’s real GDP is projected to grow by 6.3% in fiscal year 2025-26 and 6.4% in 2026-27. Private consumption will gradually strengthen, driven by rising real incomes that are helped by moderate inflation, recent tax cuts and a strengthening of the labour market. Investment will be supported by declining interest rates and substantial public capital spending, but higher US tariffs will weigh on exports. Inflation will remain contained at around 4% as economic activity grows around trend. A less benign monsoon season or higher global commodity prices could drive up food prices and inflation.

Real GDP expanded by 6.2% year-on-year in the third quarter of FY2024-25, supported by robust domestic demand and strong investment. High-frequency indicators suggest that economic activity remained solid in the fourth quarter. Industrial production rose by 3.7% year-on-year in the first four months of 2025, with the manufacturing sector regaining strength. With headline inflation expected to remain within the target range in the following years and inflation expectations projected to remain anchored, there is scope for the central bank to reduce the policy rate towards a more neutral level. A further 25-basis point cut is expected by the end of 2025.

OECD noted that private consumption in India is supported by rising real incomes and lower personal income taxes. Investment will remain strong, bolstered by easing financial conditions. However, export growth is expected to slow due to weaker global demand, the impact of higher tariffs and heightened trade policy uncertainty. Headline inflation is projected to average 4.1% in FY2025-26 and 4.0% in FY2026-27.

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