The Organisation for Economic Cooperation and Development (OECD) improved the 2025 GDP growth forecast for India by 6.7 percent instead of 6.3 percent due to the strong performance of domestic demand and the effective implementation of GST reforms. The positive revision is a reflection of the economic strength of India under global uncertainties, which is backed by the easing of the monetary policy and good public investment.
The economic performance of India is driven by domestic demand
According to Economic Times, the Organisation for Economic Cooperation and Development (OECD) on Tuesday increased India’s GDP growth by 40 bps to 6.7 per cent in 2025 against its previous estimation of 6.3 percent in June due to high domestic demand and solid GST reforms. Higher tariff rates will burden the export sector in India, but the overall activity is expected to be boosted by monetary and fiscal policy easing (including the reform of the Goods and Services Tax), and the growth is expected to rise to 6.7% in 2025 and 6.2% in 2026, OECD said in a statement.
It added that food price inflation in India has been falling fast due to high domestic supply and export controls. Gross domestic product (GDP) in India increased by five quarters high at 7.8% in the April-June period. To drive consumption, the GST Council sanctioned a two-rate (5 percent and 18 percent) system to minimize taxation on domestic products, whereas in February, the government declared that incomes of up to Rs 12 lakh would go unassessed by income taxes.
The world economy is still looking optimistic
The world economy, however, is projected to grow more gradually, only by 3.2 percent in 2025 versus 3.3 percent last year, OECD Economic Outlook reports, versus the 2.9 percent predicted by the OECD in June. But the Paris-based organisation retained its 2026 prediction at 2.9, and the inventory-building gain is already dissipated, and an increase in tariffs is also likely to drag on investment and trade expansion.
Further barriers to trade, or extended policy uncertainty, might reduce growth, Cormann of the OECD explained to a press conference, increasing the cost of production and placing a burden on investment and consumption. The OECD predicted economic growth at 1.8 per cent in 2025 (up to 1.6 per cent in June) in the U.S., versus 2.8 percent today, and later to the same level in 2026, the same forecast as in June. The expected effect of the higher tariffs, the net immigration, and federal job cuts will be counteracted by an AI investment boom, fiscal support, and a cut in interest rates by the Federal Reserve.
China is experiencing slowed growth amid a trade crisis
Growth in China was also identified to slow in the second half of the year as the rush to export before the U.S. tariffs recede and fiscal support declines. However, the economy of China is projected to expand 4.9% this year – an increase of 4.7% in June – to grow to 4.4% in 2026 – an increase of 4.3% revised upwards. The OECD said that trade and geopolitical tensions were counterbalancing the stimulus of lower interest rates in the euro zone.
This positive revision of India by the OECD highlights the inherent strength of the economy despite global headwinds due to good policy reforms and consumption within the country. In spite of the pressure of tariffs imposed by the US on exports, the domestic consumption power still protects the overall economic performance, making India a beacon of hope in the emerging market.
Although external threats of US tariffs are a risk to the export sectors, India has a diversified economic foundation and favorable fiscal policies, which are resilient. India has been on a significant growth trend, and is being aided by GST reforms and a monetary easing, which has placed India as a shining star in the global economic map and shows how specific policy interventions can be effective in continuing to propel the economy.