Good News for Indian Economy! OECD raises FY27 GDP forecast, cuts inflation estimate - Check latest projections

The Organisation for Economic Co-operation and Development (OECD) has raised India's economic growth forecast for FY27 by 20 basis points to 6.3 per cent, while retaining its FY28 growth projection at 6.4 per cent, reflecting confidence in the country's economic resilience and growing role in global manufacturing supply chains.

The OECD also lowered its consumer price inflation (CPI) forecast for FY27 by 30 basis points to 4.8 per cent, indicating expectations of easing price pressures in the economy.

The revised projections come at a time when India is strengthening its position in global manufacturing and industrial supply chains, despite receiving significantly lower government support than Chinese companies.

India gains ground in global manufacturing

In its latest assessment, the OECD said India is emerging as an increasingly important player in global manufacturing, supported by expanding industrial capabilities and growing participation in international supply chains.

The report noted that Chinese companies continue to receive substantially higher levels of government support than firms in many other economies, including India. According to the OECD, Chinese industrial firms received, on average, three to eight times more government support than firms based in OECD countries between 2005 and 2024.

The support received by Chinese firms was also considerably higher than that provided to companies in non-OECD economies such as India, Brazil and Indonesia.

Despite this gap, the OECD said India has steadily increased its presence across several key manufacturing sectors and is becoming an important contributor to global industrial production.

Aerospace and industrial materials drive expansion

The aerospace and defence sector was highlighted as one of the areas where India's role is expanding. The OECD said the industry, traditionally dominated by companies from North America and Western Europe, is becoming more diversified as demand increases across the Asia-Pacific region and Gulf countries.

According to the report, countries such as India, China, Japan and South Korea are playing a more important role in aerospace supply chains. These countries initially emerged as innovation-driven component suppliers but are increasingly becoming original equipment manufacturers (OEMs).

The OECD also pointed to India's growing presence in industrial materials manufacturing. Industries such as glassmaking, advanced ceramics and high-performance refractories were historically dominated by companies based in Europe, Japan and the United States.

However, the report said the centre of gravity has gradually shifted towards Asia over the past two decades, with India and China becoming major producers and consumers across several industrial material segments.

The OECD attributed this shift to factors such as rapid infrastructure development, construction activity, lower production costs and evolving business strategies among multinational companies.

Growing role in heavy machinery and steel

India's role in the heavy machinery industry has also expanded, according to the report. While major heavy machinery manufacturers continue to be concentrated in OECD countries, India has emerged as a significant producer alongside several other developing economies.

The report further highlighted India's growing importance in the global steel industry. It noted that some of the world's largest steel producers are now based in China, India and OECD economies.

Although China remains the dominant player in the sector, India has strengthened its position as a major steel-producing nation and continues to increase its share in global production.

The OECD said China's steel companies accounted for 47 per cent of global steelmaking capacity and 49 per cent of total steel industry revenue covered in its database in 2024. However, India's expanding industrial base and manufacturing capabilities are helping the country gain greater prominence across global value chains.

Lower inflation outlook supports growth

The latest growth forecast suggests that the OECD expects India's economy to maintain strong momentum over the next two financial years. The upward revision in the FY27 GDP growth estimate, combined with a lower inflation outlook, points to expectations of stable economic conditions and continued expansion in manufacturing and industrial activity.

According to the OECD, India's growing integration into global supply chains across sectors such as aerospace, industrial materials, heavy machinery and steel is expected to support long-term economic growth, even as the country competes with economies that provide significantly higher levels of state support to domestic industries.