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OECD Predicts Higher Growth For India, Slowdown In China

A slowdown in exports to China will hit Singapore, Malaysia and Thailand. These countries could also be affected by a decline in Chinese tourism

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Real gross domestic product (GDP) growth in emerging Asia, including ten members of the Association of Southeast Asian Nations (ASEAN) and China and India was estimated to be 6.5 per cent in 2015, and this is going to see a decline of 0.3 per cent to about 6.2 per cent over the next four years, according to the Economic Outlook 2016 survey by the Organisation of Economic Co-operation and Development (OECD).

During 2016-20, private consumption is going to be the largest contributor to the overall growth in these economies and exports will contribute less than before.

The report also predicts that the annual growth in India may be the highest in the region at 7.3 per cent over the mid-term, while China is set to slow to annual average of 6 per cent. But, the countries in the Asean region will remain more or less at the same growth level of 4.6 per cent on an average in 2015 and slowly rising to 5.2 per cent over the medium term.

"The main risk to growth in this region is the slowdown in China, which posses the threat of a demand shock, although the potential impact varies greatly," says the OECD 2016 outlook.

A slowdown in exports to China will hit Singapore, Malaysia and Thailand hardest and the slow growth in investment in China could be worrying for Thailand and Malaysia, which will also be affected by a decline in Chinese tourism.

Other potential threat for the economic growth in the region is the increase in interest rate in the US.

While, a decline in productivity growth across a larger part of emerging Asia is among the additional risks. Estimates by OECD development centre also show that even in the best case scenario, it will take some time for the emerging Asia’s middle income countries to reach the high income status.

Lack of stronger financial education initiatives poses a key challenge for India in its overall growth.

The OECD survey points out that fast and inclusive development will require stronger financial education initiatives and increased access to improved and quality education in general.

Although financial access is a policy priority for India, it should also look at financial education programmes as important to ensure that the people are aware of the financial services available and sufficiently informed about the opportunities and risks to make responsible decisions about personal and business finance, the report suggests.

The OECD survey highlights that higher quality and accessible education in general is important for a country like India with a large young population, though the enrolment of children for primary education and its results, even in rural areas, have shown much improvement (enrolment of over 96 per cent) in the country.

But, less change has been seen at the secondary and tertiary levels, where more students will need to develop skills beyond basic literacy and numeracy.


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