India to remain world's fastest growing economy in FY26: OECD

India remains the world’s fastest-growing major economy with an expected growth of 6.7 per cent in 2025-26, driven by higher private consumption and buoyant government expenditure on infrastructure projects, according to the economic outlook report released by the Organisation for Economic Co-operation and Development (OECD) on Tuesday. 

"India’s real GDP is projected to grow by 6.7 per cent in fiscal year 2025-26, 6.2 per cent in 2026-27 and 6.4 per cent in 2027-28. Higher tariffs applied by the United States are expected to weigh on exports, but private consumption will be supported by rising real incomes as inflation remains low and consumption taxes decline," the report said.

Buoyant investment will be sustained by declining borrowing costs and strong public capital expenditure. Current low headline inflation is projected to gradually converge towards the 4 per cent target. Risks are broadly balanced. Bilateral negotiations with the US could lead to lower tariffs and boost exports and investment, while higher oil import prices could create inflation pressures, the report further stated.

It also pointed out that the current broadly neutral fiscal stance balances support to growth in the face of global trade headwinds with the need to rebuild fiscal buffers and bring public debt to a more prudent path. Sustaining strong public investment and encouraging private participation through enhanced public-private partnerships would speed up infrastructure development and ease persistent bottlenecks, the report observed.

Just ahead of the RBI’s monetary policy committee review meeting on December 3-5, the OECD report states that India’s monetary policy has eased since the beginning of the year, but with below-target inflation and below-trend growth, there is room for further cuts in the policy rate.

India’s growth surged to 8.2 per cent print for the second quarter of FY26, leading to economists raising their forecast to over 7 per cent for FY26.

The OECD report also states that the global economy has proved resilient this year, but underlying fragilities remain. It projects global growth slowing from 3.2 per cent in 2025 to 2.9 per cent in 2026, before picking up to 3.1 per cent in 2027.

GDP growth in the US is projected to decline from 2.0 per cent in 2025 to 1.7 per cent in 2026 and 1.9 per cent in 2027. In the Euro area, growth is expected to be 1.3 per cent in 2025, 1.2 per cent in 2026, and 1.4 per cent in 2027. China’s growth is projected to ease from 5 per cent in 2025 to 4.4 per cent in 2026 and 4.3 per cent in 2027.

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