The Organisation for Economic Co-operation and Development (OECD), on Wednesday, scaled down India’s growth estimate to 5.3 per cent for 2013 from 5.9 per cent, and cautioned that structural bottlenecks could further constrain investment and growth potential.

The OECD Economic Outlook report said, however, that the “GDP growth is projected to rise gradually over the next two years... Significantly more growth would be forthcoming if structural bottlenecks were swept away by fundamental structural reforms.’’

The latest report said the 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 took effect.

“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,” the OECD said.

It further said that with inflation projected to decline, the Reserve Bank of India could ease monetary policy provided the government stuck to its fiscal consolidation plans.

“The large current account deficit may, however, make it difficult to cut interest rates significantly,” it said.

Talking about India’s neighbour China, the OECD forecast that its economy would grow 7.8 per cent this year, down from a previous estimate of 8.5 per cent.

It also noted that “until around 2020, China is set to have the highest growth rate among major countries, but could be then surpassed by India”.

China, the OECD report said, would likely go past the United States as the world’s largest economy in the next few years, and India had ‘probably recently’ surpassed Japan to become the third largest.

Looking ahead, it said India was likely to improve growth to 6.7 per cent next year, after having logged a decade’s low of 3.8 per cent in 2012.

Global economy

It said the global economy would grow at 3.1 per cent in 2013, and accelerate further to 4 per cent in 2014.

The U.S. is projected to expand 1.9 per cent this year, and then accelerate to 2.8 per cent in 2014.

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