OECD outlook: India’s growth is strong but faces energy and inflation pressures
The Organisation for Economic Cooperation and Development (OECD) on Thursday projected India’s GDP to grow by 7.6 percent in the current fiscal year and 6.1 percent in 2026-27. The OECD, in its interim Economic Outlook report, said the evolving conflict in the Middle East has “human and economic costs” for the countries directly involved, and will test the resilience of the global economy. A halt in shipments through the Strait of Hormuz and the closure or damage of energy infrastructure have generated a surge in energy prices and disrupted the global supply of energy and other important commodities, such as fertilisers.
“The decline in (US) tariffs should support growth in India, though gas rationing will disrupt some production activities and fiscal support is expected to fade, with growth easing from 7.6 percent in fiscal year (FY) 2025-26 to 6.1 percent in FY 2026-27 and 6.4 percent in FY 2027-28,” the OECD said.
The fading deflationary impact of past food and energy price-reducing shocks will be exacerbated by the recent surge in global energy prices, the OECD said, pushing inflation up from 2 percent in FY 2025-26 to 5.1 percent in FY 2026-27 and 4.1 percent in FY 2027-28.
Amongst the emerging-market economies, India is projected to raise policy rates temporarily in the second quarter of 2026 to help offset stronger inflationary pressures, the OECD report said. US bilateral tariff rates have declined following the US Supreme Court ruling against the tariffs imposed under the International Emergency Economic Powers Act. There are particularly large reductions for several emerging-market economies, including India. Nonetheless, the overall US effective tariff rate remains well above that prevailing prior to 2025.
The OECD report projected global GDP growth to ease to 2.9 percent in 2026 before edging up to 3 percent in 2027. “The energy price surge and the unpredictable nature of the evolving conflict in the Middle East will raise costs and lower demand, offsetting the tailwinds from strong technology-related investment and production, lower effective tariff rates, and the momentum carried over from 2025,” it said.
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