India's upswing will stay in good shape

Q3 GDP data in India, published today, showed that the economy continued to expand at a rapid pace. The upswing will probably stay strong and slowing inflation will remain the top policy priority. We continue to anticipate that the repo rate will be lifted by another 25bp in March 2011 and then expect another 50bp of tightening by end-2011 which would take the rate to 7%. The risk to this view is that the Reserve Bank (RBI) moves sooner and ends up lifting the repo rate by more.

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