India could be back on top as the world’s fastest growing economy this year

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India’s gross domestic product is expected to grow 12.6% in the country’s fiscal year starting in April, according to a forecast released Tuesday by the Organization for Economic Co-operation and Development.

If that level of growth materializes, it would allow India to regain its status as the fastest growing large economy – stealing the title from China, which the OECD says will generate growth of 7.8 % this calendar year after avoiding a recession in 2020.
The Indian economy recorded a gross domestic product increase of 0.4% in the last three months of 2020, ending its recession. For 2020 as a whole, India’s economy contracted by around 7%.

The OECD also unveiled major improvements to its global outlook on Tuesday, saying “the economic outlook has improved markedly in recent months” thanks to the rollout of coronavirus vaccines and additional stimulus announcements. The Paris-based agency also said there were signs that recent containment measures were not hurting the economy as much as earlier efforts.

“This may reflect more careful targeting of public health and income support measures,” the group said, adding that businesses and consumers have adjusted to restrictions.

The OECD now expects the global economy to grow 5.6% in 2021, up from an estimate of just 1.4% in December.

United States could grow 6.5%

The US economy is now expected to grow 6.5% this year, a major improvement from the previous forecast of 3.3%. The agency underlined the effects of “strong fiscal support” President Joe Biden’s $ 1.9 trillion stimulus package.

In Europe, where vaccine deployment has been slow outside the UK, the OECD predicts “a more gradual recovery”. The 19 countries that use the euro should see their production increase by 3.9%. Britain’s economy, which was hit harder than its European neighbors in 2020, will grow 5.1%.

But the outlook remains very uncertain due to the pandemic. The OECD has noted that vaccination campaigns are progressing at different speeds across the world and that there is always a risk of new mutations that resist vaccines.

He also touched on the inflation debate that rocked the markets. Investors are increasingly concerned that a strong recovery could trigger a surge in prices later this year, forcing central banks to raise interest rates or cut bond purchases earlier than expected.

The OECD has acknowledged that price pressures are growing on some fronts.

“A faster-than-expected recovery in demand, especially from China, coupled with supply shortfalls drastically pushed up food and metal prices, and oil prices rebounded to their average level. in 2019, ”he said.

But the agency stressed that with economies and the labor market still weak, central bankers should maintain loose monetary policies that have boosted the recovery even if inflation exceeds certain targets.

“The transitory factors that drive up headline inflation do not justify changes in policy stance,” he said.

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