The Organisation for Economic Cooperation and Development (OECD) on Monday cut its growth projection for India to 9.9 per cent this year from 12.6 per cent estimated earlier in March.
"In India, the rapid rebound in activity since mid-2020 has paused with resurgence of the Covid-19 pandemic and renewed localised containment measures raising uncertainty and hitting mobility," it said in its latest Economic Outlook.
Higher commodity prices have also pushed up inflation, reducing household real incomes. Monetary policy remains accommodative with plans for gradual normalisation being put on hold, but scope for additional fiscal support is limited.
"Provided the pandemic can be contained quickly, GDP growth could still be around 10 per cent in FY 2021-22 and 8.25 per cent in FY 2022-23 with pent-up consumer demand, easy financial conditions and strong external market growth helping the recovery to gain momentum."
On the other hand, prospects for the world economy have brightened but the recovery is likely to remain uneven and, crucially, dependent on the effectiveness of public health measures and policy support, said OECD.
In many advanced economies more and more people are being vaccinated, government stimulus is helping to boost demand and businesses are adapting better to the restrictions to stop the spread of the virus.
But elsewhere, including in many emerging-market economies where access to vaccines as well as the scope for government support are limited, the economic recovery will be modest.
The OECD has revised up its growth projections across the world's major economies since its last full Economic Outlook in December 2020.
It now sees global GDP growth at 5.8 per cent this year (compared with 4.2 per cent projected in December), helped by a government stimulus-led upturn in the United States, and at 4.4 per cent in 2022 (3.7 per cent in December).
"The world economy has now returned to pre-pandemic activity levels, but real global income will still be some 3 trillion dollars less by the end of 2022 than it would have been without a crisis," said OECD.
But some targeted restrictions on mobility and activity may still need to be maintained, particularly on cross border travel. This will affect the prospects for a full recovery in all countries, even for those with a fast vaccine rollout or low infection rates.
( With inputs from ANI )
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