India is the fastest-growing economy in the world, growing at around 7.5% annually. While Finance Minister Arun Jaitley has asked the investors around the world to make good use of this opportunity by investing in
Paris-based Organisation for Economic Cooperation and Development (OECD) has said that this "solid" growth led by strong investment will continue, and reforms to bolster infrastructure spending and robust demand growth will help it expand further.
The outlook was released a day after data showed that Indian economy grew at 7.6% in 2015-16, while economists expect it to grow 7.9% in the coming year.
However, the OECD has cautioned about the mounting non-performing loans in the banking sector, which are on rise in India and several other countries.
The report further said that these loans add to "moral hazard", and a long period of fostering them would prevent resource reallocation from non-viable firms, which would lay negative impact on productivity and employment growth.
"If inflation continues to decline, the monetary authorities could cut interest rates in 2017, while further steps should be taken to improve monetary policy transmission," it said.
The organisation then went ahead to recommend Indian authorities that they should continue to reduce budget deficit via improved tax mobilisation, and spend more money towards physical and social infrastructure.
On the global front, the organisation has projected that the global economy will grow only 3% in 2016 because of weak trade growth, sluggish investment and slower activity. This will however, improve to 3.3% in 2017.
Image source
