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India may become world's 3rd largest economy: OECD

Paris-based think-tank, the Organisation for Economic Co-operation and Development (OECD), Wednesday has projected that India probably surpassed Japan to become the world's third largest economy after the US and China, even as it lowered the country's economic growth projection for 2013 to 5.3 percent.

"China will likely pass the United States as the world's largest economy in the next few years and India has probably recently surpassed Japan to be third largest," said the OECD Economic Outlook report.

Until around 2020, China is set to have to highest growth rate among major countries, but could be then surpassed by India, reports media.

OECD also said that India's growth was at its weakest in a decade in 2012, reflecting both subdued external and domestic demand, including from fiscal tightening. Growth should gradually recover in 2013 as efforts to speed up the approval of large investment projects and the partial deregulation of foreign direct investment take effect. 

Headline inflation has remained stubbornly high, but inflation is expected to decline further as the effects of poor weather on food prices and hikes in administered prices fade, it added.

It said, Fiscal tightening and the new fiscal consolidation roadmap are welcome and should allow monetary policy to be eased further. On-going efforts to better target household transfers are commendable although further progress is needed in India. 

Energy subsidies remain high and should be cut. The tax system should also be reformed to raise more revenue in a less distortive way so as to boost private investment and competitiveness. In particular, the long-awaited reform of indirect taxes should be implemented swiftly. 

However, structural bottlenecks continue to constrain both investment and growth potential and addressing them is the key to boosting growth and raising living standards, OECD added in its press release.

OECD said the world real GDP is projected to increase by 3.1 percent this year and by 4 percent in 2014. Across OECD countries, GDP is projected to rise by 1.2 percent this year improve to 2.3 percent in 2014. Growth in non-OECD countries will rise by 5.5 percent this year and 6.2 percent in 2014.

OECD also said that by early 2030s, the BRIICS' (Brazil, Russia, India, Indonesia, China and South Africa) combined GDP should roughly equal that of the OECD (based on current membership), compared with just over half that of OECD now.

"Between now and 2060, GDP per capita is seen to increase more than 8-fold in India and 6-fold in Indonesia and China," it added.