India, China may face downturn in coming months: OECD

India and China, besides some developed countries, may face economic downturn in the coming months, according to an analysis by the Organisation for Economic Cooperation and Development (OECD) — a grouping of mostly advanced nations.

It also said global economic growth was slowing down.

The latest reading is in contrast with the bullish outlook for fast-growing economies like India, which tackled the global financial meltdown better than many other countries.

OECD’s latest Composite Leading Indicators (CLIs) released today show that global economic expansion is slowing down.

CLIs provide early signals of turning points in business cycles — fluctuations of economic activity around its long-term potential level.

“The outlook given by the CLIs for Canada, France, Italy, the United Kingdom, Brazil, China and India points strongly to a downturn,” OECD said in a statement.

CLI for India stood at 100.4 in August, a little lower than 100.6 recorded in July. In the case of China, the August indicators slipped to 101.3 from 101.7 in the previous month.

Interestingly, a few days ago, Finance Minister Pranab Mukherjee had said it was reasonable to expect the national economy to go back to the “robust growth path of around 9 per cent average” in the short term.

India’s economic growth rate was 7.4 per cent in 2009-10 and is projected to be over 8.5 per cent for the current financial year.

From an average of over 9 per cent for three years till 2007-08, the growth slipped to 6.7 per cent in 2008-09 because of the global economic crisis that began in 2008. India is not part of the Paris-based grouping. Apart from India and China, 3 also provides CLIs for three other major Asian economies — Indonesia, Japan and South Korea.

Meanwhile, the indicators for the OECD region, comprising 33 economies, including the US and Germany, marginally fell to 102.9 in August. It was at 103 in the previous month.

OECD, which accounts for over 60 per cent of the global economic output, said August indicators “reinforce signals of slowing economic expansion already seen last month”.

The CLI for the OECD area decreased by 0.1 point in August, making it the fourth straight month that the index had shown negligible growth or decline.

However, the grouping pointed out that there were stronger signals of a peak emerging in the world’s largest economy, the US.

“For Germany, Japan and Russia, the CLI points to a continuation of the expansion phase,” it added.