India Could be Back as the World’s Fastest Growing Economy this Year: CNN Report

Read in your language:

“India’s economy should come roaring back to life in 2021…as its gross domestic product is projected to expand by 12.6% during the country’s fiscal year starting in April,” reports CNN.

It cited a forecast released Tuesday by the Organization for Economic Cooperation and Development (OECD) to say that “if that level of growth is realized, it would allow India to reclaim its status as the fastest growing major economy — stealing the title back from China.

The OECD forecast is a percentage higher than the IMF’s forecast for 2021 — which is 11.5 percent.

The Indian economy as a whole contracted in 2020 by about 7%, says OECD (India’s statistics office’s 2020-21 advance estimate for GDP growth is -8%, i.e. 6 percent contraction). So the climb up could be 20% amid the Reserve Bank of India’s warning that bad debt surge threatens India financial stability. Bloomberg reported in January that India’s central bank expects banks’ bad-loan ratios to almost double this year. It warned that soaring markets and a weakened economy threaten financial stability.

A South Asian economic observer earlier told DesPardes that “with Coronavirus second and third wave, India’s economy may halve by 2023, less than Turkey.” According to him, “there was a projection of 9 to 10 percent growth rate before PM Modi’s victory. Now it is Minus 10 percent.”

The Paris-based agency has also unveiled major upgrades to its global outlook.

A faster-than-expected recovery in demand, especially from China, coupled with shortfalls in supply, has pushed up food and metals prices considerably, and oil prices have rebounded to their average level in 2019…price pressures are building on some fronts. A strong recovery (therefore) could trigger a spike in prices later this year, forcing central banks to raise interest rates

The OECD now expects the world economy to grow by 5.6% in 2021, an improvement of more than one percentage point from its estimate in December.

The United States’ economy, it says, is now expected to expand by 6.5% this year, over three percentage points better than the December forecast.

In Europe, the OECD predicts “a more gradual upturn.” The 19 countries that use the euro are expected to see output expand by 3.9%. The UK economy, which suffered a bigger hit than its European neighbors in 2020, will grow by 5.1%.

But the outlook remains highly uncertain due to the pandemic, CNN writes. “The agency emphasized that with global economies and the job market still weak, central bankers should maintain loose monetary policies that have boosted the recovery even if inflation overshoots some targets.”