London: India has probably surpassed Japan to become the world's third largest economy after the US and China, Paris-based think-tank OECD said on Wednesday 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, it further said.
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.
The Organisation for Economic Cooperation and Development (OECD), which in November had projected India to grow at 5.9 percent in 2013, cautioned that structural bottlenecks in the country could further constrain investment and growth potential.
"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 report said.
Looking ahead, it said India is likely to improve growth to 6.7 per cent next year, after having logged a decade's low of 3.8 percent in 2012.
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.
In the US, activity is projected to rise by 1.9 percent this year and by a further 2.8 percent in 2014, OECD said.
GDP in the euro area is expected to decline by 0.6 percent this year and then rebound by 1.1 percent in 2014. Japan's GDP is expected to grow by 1.6 percent in 2013 and 1.4 percent in 2014, it added.
Talking about India's neighbour China, OECD forecast that its economy would grow 7.8 percent this year, down from a previous estimate of 8.5 percent.
Referring to India, it also said the 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, OECD said.
It further said that with inflation projected to decline, the Reserve Bank of India could ease monetary policy provided the government sticks to its fiscal consolidation plans.
"The large Current Account Deficit may, however, make it difficult to cut interest rates significantly," it said.
However, subsidies could be better targeted and more revenues could be raised in a less distorted way, it added.