India set to make modest recovery on reforms: OECD

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News:The Organisation for Economic Co-operation and Development(OECD) has released its Economic Survey of India report.

Facts:

Report on GDP growth:

  • The report has projected GDP growth in the current fiscal (2019-20) at 5.8% lower than 6.8 per cent in 2018-19. 
  • However, it estimated the GDP to grow at 6.2% during 2020-21 and further to 6.4% during 2021-22.

Key Highlights from the report:

  • Income has increased fast in recent years but private investment has lagged behind.However,the private investment would bounce back as capacity utilisation rises.
  • The recent loosening in monetary policy, combined with fiscal rectitude, will lower the cost of borrowing for the corporate sector.
  • The ongoing resolution of distressed assets of non-financial corporates under the Insolvency and Bankruptcy Code is expected to unlock resources for new investment projects.
  • Reforms to improve the ease of doing business including recent measures to liberalise FDI and efforts to improve judicial services and contract enforcement will also help. 
  • Exports will suffer only marginally from the withdrawal of US preferential duties for low-income countries as the products concerned account for a small share of India’s export basket.

Concerns Highlighted by the report:

  • Economic growth has been strong but social and governance challenges remain.
  • The public debt-to-GDP ratio remains relatively high
  • Ambitious reforms have been passed but implementing them fully would boost incomes and wellbeing.
  • Addressing domestic structural bottlenecks is key to supporting India’s competitiveness
  • Air pollution is high and will increase in the absence of bold action.
  • international oil prices have come down but they remain volatile and pose risks for inflation,the current account and public finances.

Additional information:

About OECD:

  • The Organisation for Economic Co-operation and Development(OECD) is an intergovernmental economic organisation with 36 member countries
  • It was founded in 1961 to stimulate economic progress and world trade.It is headquartered in Paris,France.
  • It works to build better policies for better lives.Its goal is also to shape policies that foster prosperity, equality, opportunity and well-being for all.
  • India is not a member of OECD but has been a key economic partner.