The OECD also raised India’s growth forecast for FY2027-28 by 0.1 percentage point to 6.5 per cent. Both projections, however, indicated moderation from the 7.8 per cent growth recorded in FY2025-26, according to the report, titled Weathering Successive Shocks.
Resilient domestic demand and government measures cushioning households and businesses from higher energy prices had supported India’s economic momentum. However, reduced purchasing power is expected to weaken growth during the second half of calendar 2026, before a gradual recovery in 2027.
India’s economy is projected to grow by 7.1 per cent in FY2026-27, retaining the strongest G20 outlook after an OECD forecast upgrade.
US growth is forecast at 2.2 per cent in 2026, China’s at 4.5 per cent and global growth at 2.9 per cent.
Higher energy costs, trade uncertainty and inflation remained risks, while resilient domestic demand supported India’s economic momentum.
Globally, the OECD projects GDP growth of 2.9 per cent in 2026 and 3.0 per cent in 2027. Government support, additional energy supplies from outside the Gulf and strong artificial intelligence (AI)-related investment had helped offset the economic impact of the Middle East conflict.
The US growth forecast is raised by 0.2 percentage points to 2.2 per cent for 2026 and by 0.3 percentage points to 2.1 per cent for 2027. Strong AI-related investment, including spending on data centres and technology equipment, is expected to support activity, partly offsetting slower consumer spending and real income growth.
China’s growth is projected to moderate from 5.0 per cent in 2025 to 4.5 per cent in 2026 and 4.2 per cent in 2027. Rising inflation is expected to weigh on consumption, while government policies aimed at curbing excessive production capacity would restrain investment growth.
The euro area is forecast to expand by 1.0 per cent in both 2026 and 2027. Higher energy prices and policy rates are expected to constrain activity, although easing energy costs and increased defence spending would provide support over time.
Within the euro area, Germany’s economy is projected to grow by 1.1 per cent in both years. France’s growth is forecast at 0.4 per cent in 2026 and 0.7 per cent in 2027, while Italy is expected to expand by 0.9 per cent and 0.6 per cent, respectively. Spain remained comparatively stronger, with projected growth of 2.6 per cent in 2026 and 1.8 per cent in 2027.
The UK economy is expected to grow by 1.1 per cent in 2026 and 1.0 per cent in 2027, with newly announced government support measures helping consumption. Canada’s growth is forecast at 0.9 per cent and 1.3 per cent, respectively, supported next year by stronger private consumption, government investment and a gradual recovery in business investment.
In Asia, Japan’s growth is projected to ease from 0.8 per cent in 2026 to 0.7 per cent in 2027, as higher energy import costs and rising policy rates offset support from business investment and government consumption. South Korea’s economy is expected to expand by 3.7 per cent in 2026, supported by strong industrial production and exports, before slowing to 2.6 per cent in 2027.
Indonesia is forecast to maintain relatively robust growth of 5.2 per cent in 2026 and 5.1 per cent in 2027, with improved terms of trade supporting investment. Brazil’s economy was projected to grow by 2.0 per cent and 1.9 per cent, respectively, while Mexico’s growth is expected to strengthen from 1.5 per cent to 1.8 per cent. Australia’s growth is forecast to ease from 1.9 per cent to 1.7 per cent.
For India, headline inflation is projected at 4.7 per cent in FY2026-27 before easing to 4.2 per cent in FY2027-28. Government price support measures are mitigating energy-related pressures, although the OECD anticipated a temporary increase in policy rates to contain stronger inflation.
US headline inflation is expected to ease from 3.6 per cent in 2026 to 2.6 per cent in 2027, while euro area inflation is projected at 3.0 per cent and 2.9 per cent. Across the G20, headline inflation is forecast to rise to 4.1 per cent in 2026 before moderating to 3.6 per cent in 2027.
Trade policy changes added to uncertainty. The estimated effective tariff rate on US imports increased from 9.6 per cent in June to 10.9 per cent by mid-September. Among major countries, imports from India and Brazil faced the largest increases in estimated effective tariff rates after accounting for the share of goods subject to duties.
The OECD warns that prolonged energy supply disruptions, extreme weather and weaker-than-expected returns on AI investment could undermine growth. For India, a very strong El Niño posed risks to monsoon rainfall and agricultural production, potentially adding to food price pressures.
The organisation urges governments to target energy support at vulnerable households and financially sound small and medium-sized businesses, while diversifying energy supplies, improving efficiency and strengthening resilience against future disruptions.
Fibre2Fashion News Desk (SG)
