Indian economy will see lower GDP growth at 5.8% in 2019, but will recover to post 6.2% expansion in 2020 and 6.4% in 2021, the Organisation for Economic Cooperation and Development said in its Economic Survey of India. The economy will see a modest recovery as the initiatives taken by the government to tackle the slowdown will start bearing fruit, the Paris-based international organisation said.
India needs bold reforms to modernise the economy, helping it to create quality jobs and improve public services and welfare, it said. “Slower growth underlines the need to fully implement existing reforms and continue lowering barriers to trade,” said OECD Chief Economist Laurence Boone, releasing the report in New Delhi on Friday.
Indian economy is in the grips of a slowdown induced by low consumption demand and weak private investment. It expanded 5% in the first quarter of the fiscal year ended June and followed it up with an even more dismal 4.5% in the second quarter. The Reserve Bank of India has set a growth target of 5% for the financial year in its bimonthly monetary statement released on Thursday. The OECD growth estimate of 5.8% for the calendar year 2019 is more optimistic than the central bank prediction.
India has increased its participation in global trade, but needs to improve its jobs record and enhance rural incomes and per-capita GDP across states. Revival of growth is key to generating enough jobs for India’s young population, the report said, adding that the country needs to improve the health of its financial sector, weighed down by non-performing assets and slow bankruptcy procedures.
The country’s share of global exports rose from 0.5% in early 1990s to 2.1% in 2018 on the back of robust information technology and pharmaceuticals sectors. India was expected to benefit greatly from the US-China trade war, but fail to do so because of infrastructure bottlenecks and high factor costs. OECD expects India to be the largest beneficiary cuts in trade restrictions on services.
The strides made by the Indian economy is yet to translate into the creation of formal jobs because of restrictive labour laws, say the report. While the country has made good starts in improving access to electricity, drinking water and rural roads, the rural housing needs to improve, it said.