NEW DELHI: India is emerging from its worst economic slowdown in a quarter-century, but needs big structural reforms to return to the eight-percent-plus growth needed to generate jobs for its burgeoning young population, the OECD said yesterday.
The Organisation for Economic Cooperation and Development left unchanged its 5.4-percent-growth forecast for this financial year to March 30, 2015 — a figure broadly in line with government projections and up from 4.7 percent expansion posted by India last year.
But the Paris-based OECD revised upwards its forecast for next year, projecting Asia’s third-largest economy will expand by 6.6 percent — compared to its 5.7-percent estimate in May.
“The Indian economy is coming out of some tough times,” OECD chief economist Catherine Mann told reporters. India’s growth has languished below five percent for the last two years, the longest weak growth spell in 25 years, hit by high interest rates, stubborn inflation and weak investment.
The economy should grow by 6.8 percent in the 2016-17 year, the OECD’s India Economic Survey added, bolstered by economic reforms already introduced by the right-wing government of Narendra Modi which swept to power in May.
Despite the forecast growth, significant structural reforms are needed to return to the near double-digit figures of the past.
“Structural reforms would help return India’s growth to the near double-digit levels of the previous decade,” the OECD said, adding it was “critical” to remove major economic bottlenecks.
“Structural reforms” is economic shorthand for changes such as deregulation, better governance and improvements to public finances.
The report warned that without such steps, expansion “will remain below the eight-per-cent growth achieved during the previous decade”.
India needs close to nine-to-10-percent growth to generate jobs for millions of young people who join the workforce each year, economists say. “Key reforms in the business environment, to labour markets and to infrastructure will bring economic growth back to higher levels seen in the recent past,” Mann said.
AFP
