According to the OECD report, the potential downside risks for India's growth do NOT include:

Solution

Strengthening consumer purchasing power is actually listed as a potential upside factor, not a downside risk. • The Organisation for Economic Co-operation and Development (OECD) has increased its 2024-25 GDP growth forecast for India to 6.6%, citing buoyant public investment and improved business confidence as key drivers. • GDP growth globally is projected to remain steady at 3.1% in 2024, with a slight increase to 3.2% in 2025, influenced by stronger real income growth and lower policy interest rates. • In India, growth will be primarily driven by gross capital formation, particularly in the public sector, while private consumption is expected to remain sluggish. Exports, especially in services like information technology and consulting, are expected to grow, supported by foreign investment. • The OECD has noted the need for fiscal consolidation in India due to high public debt levels, which could restrict private investment. However, this is expected to be only partially offset by a rise in private investment as business confidence improves. • Household consumption in India is not anticipated to pick up significantly due to disappointing job creation, underwhelming rural performance, and tight financial conditions. • Downside risks for India's growth include potential new supply chain disruptions, persistent food inflation, and negative impacts from global financial market fluctuations. Conversely, potential upside factors include strengthening consumer purchasing power from ongoing disinflation, which could enhance household consumption, business investment, and job creation. • The OECD report also anticipates the possibility of the Reserve Bank of India (RBI) beginning to cut the policy rate in late 2024, with potential reductions totaling up to 125 basis points by March 2026, contingent on a normal monsoon season and stable inflation expectations.