The OECD’s April 2026 report, Foundations for Growth and Competitiveness, warns that global medium-term growth prospects are declining due to weak productivity and aging populations.
While emerging technologies like AI offer potential gains, these depend heavily on skills, infrastructure, and business dynamism. The report emphasises that long-term resilience depends on "business dynamism", that is, the ability of new firms to enter the market and reallocate resources and flexible labor markets that support worker reskilling.
India-Specific Findings: Challenges and Policy Roadmap
India continues to experience rapid growth driven by capital investment, yet the OECD identifies structural "headwinds" that could limit its long-term potential if not addressed.
1. The Labor Participation Crisis
Gender Disparity: A major constraint on India's expansion is the low labor force participation rate among women. Bridging this gap is cited as the single largest "missed opportunity" for the Indian economy.
Skill Shortages: Despite a young population, a mismatch between educational outcomes and industry needs restricts the move toward high-value manufacturing and services.
2. Infrastructure and Business Environment
The "Deficit" Barrier: Unreliable electricity, fragmented transport networks, and gaps in rural digital connectivity continue to raise the cost of doing business and hinder market access for SMEs.
Regulatory Complexity: While progress has been made, high informality and complex licensing requirements remain barriers to firm scaling and integration into Global Value Chains (GVCs).
3. Trade and Investment Openness
Tariff Impact: The report notes that reducing tariffs on intermediate and capital goods would significantly benefit India's long-term growth by lowering input costs for manufacturers.
Services Integration: Deepening trade agreements in the services sector is highlighted as a vital step to leverage India’s comparative advantage in the global digital economy.
4. Recent Progress and Next Steps
Implementation Focus: The OECD acknowledges India’s recent efforts in signing new trade agreements (e.g., with the EU and UK) and simplifying labor codes, but stresses that "effective implementation" at the state level is now the critical hurdle.
What is "Business Dynamism"?
Business Dynamism is the rate at which new firms enter the market and unproductive firms exit. It acts as a catalyst for Economic Renewal because it ensures that capital and workers are constantly moving toward the most innovative and efficient companies.
This mechanism manifests as a transition from "stagnant industries protected by red tape" to "competitive markets driven by startups," resulting in higher wages and better products. For the OECD, measuring dynamism is a primary lever to benchmark a trajectory where an economy stays young, flexible, and capable of handling global shocks.
Policy Relevance
Ensures Long-Term Growth via Women’s Economic Empowerment: By identifying low female participation as a primary constraint, the report supports policies like the PM Matru Vandana Yojana and expanded childcare to unlock a massive dormant workforce.
Makes Better Use of Digital Public Infrastructure (DPI): The OECD’s focus on "digital government" validates India’s use of Aadhaar and UPI to streamline regulations and reduce the administrative burden on small businesses.
Shows the Connection Between Skill Aligment and Job Quality: The findings advocate for a shift from "access to education" to "quality of vocational training," ensuring that the Indian workforce is ready for the high-tech shift brought by AI.
Helps Align Trade Policy with Industrial Ambition: By highlighting the costs of non-tariff barriers, the report encourages India to continue its path of "trade facilitation" to become a more attractive alternative to China in global supply chains.
Follow The Full Report Here: OECD: Foundations for Growth and Competitiveness - April 2026