New Delhi, June 3: India continues to defy the global slowdown, the OECD's latest 'Economic Outlook' said on Tuesday, projecting the country's economy to grow by 6.3 per cent in 2025 and 6.4 per cent in 2026.

Strong domestic demand, resilient services and manufacturing sectors, and ongoing infrastructure investments have been cited as key drivers for India’s strong performance amid global uncertainties.

The report also cautioned that external risks — particularly from global trade frictions — could spill over into export-heavy segments.

China, on the other hand, is losing steam. Its growth is projected to moderate from 5.0 per cent in 2024 to 4.7 per cent in 2025 and 4.3 per cent in 2026.

The Outlook projects global growth slowing from 3.3 per cent in 2024 to 2.9 per cent in both 2025 and 2026.

"The slowdown is expected to be most concentrated in the United States, Canada, Mexico and China, with smaller downward adjustments in other economies," it noted.

GDP growth in the United States is projected to decline from 2.8 per cent in 2024 to 1.6 per cent in 2025 and 1.5 per cent in 2026.

Inflationary pressures have resurfaced in some economies. Higher trade costs in countries raising tariffs are expected to push inflation up further, although the impact will be partially offset by weaker commodity prices.

Annual headline inflation in the G20 economies is collectively expected to moderate from 6.2 per cent to 3.6 per cent in 2025 and 3.2 per cent in 2026.

“The global economy has shifted from a period of resilient growth and declining inflation to a more uncertain path,” OECD Secretary-General Mathias Cormann said in a statement.

"Governments need to engage with each other to address any issues in the global trading system positively and constructively through dialogue – keeping markets open and preserving the economic benefits of rules-based global trade for competition, innovation, productivity, efficiency and ultimately growth," Cormann emphasised.

On the upside, a reversal of new trade barriers would boost global growth prospects and reduce inflation. A peaceful resolution to Russia’s war against Ukraine and of ongoing conflicts in the Middle East could also improve confidence and incentives to invest.

"Central banks should remain vigilant, given heightened uncertainty and the potential for initial increases in trade costs to push up wage and price pressures more generally," said the Outlook.

Provided inflation expectations remain well anchored, and trade tensions do not intensify further, policy rate reductions should continue in economies in which inflation is projected to moderate and aggregate demand growth is subdued, it maintained.

--IANS

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