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India's economy is set to grow faster than earlier expected, with the Organisation for Economic Co-operation and Development (OECD) raising its 2025 GDP forecast to 6.7 per cent. The upgrade from 6.3 per cent projected in June reflects strong domestic demand and the boost from Goods and Services Tax (GST) reforms, according to the OECD's latest World Economic Outlook.

The OECD said India's growth will be driven by policy support and reforms, even as higher tariff rates weigh on exports. "Activity is anticipated to be supported by monetary and fiscal policy easing, including the reform to the GST, with growth projected to be 6.7 per cent in 2025 and 6.2 per cent in 2026," the report noted.

Food inflation has moderated sharply in India, helped by stronger domestic supply and curbs on exports.

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The OECD has lifted its global growth outlook for 2025 to 3.2 per cent, crediting stronger-than-expected performance in several emerging markets during the first half of the year. The projection for 2026, however, remains unchanged at 2.9 per cent.

Much of the early support came from a rush in goods production and trade ahead of higher US tariffs, which pushed industrial output above 2024 levels in most G20 economies.

The report warned that the rise in US tariffs is already reshaping trade flows and investment patterns. Since May, import duties on goods from nearly all countries have climbed, reaching an effective rate of 19.5 per cent by the end of August - the highest since the 1930s.

The OECD said the fallout is beginning to show. Some economies are seeing weaker labour markets, with unemployment edging higher and job creation slowing. At the same time, disinflation has lost momentum, with food costs rising again and services inflation staying firm.

Looking ahead, the OECD flagged several downside risks, including further tariff hikes, fiscal stress and renewed price pressures. It also pointed to potential financial instability linked to volatile crypto assets. On the other hand, the report noted that faster advances in artificial intelligence or an easing of trade restrictions could help deliver stronger growth than currently forecast.

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Ankit Kumar is a Senior Sub Editor at Zee Business. He covers international affairs, politics, climate change, business, finance and global elections. With experience across digital med ...LATEST NEWSBy accepting cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.