India

India Economics Update

RBI still taking baby steps towards tightening

The MPC voted to keep policy rates on hold today, opting only to introduce further small measures to withdraw liquidity from the banking sector. With the RBI still focusing primarily on supporting the fragile economic recovery, we continue to think that policy rates will be left on hold for a few more months yet.

8 December 2021

India Economics Weekly

There is policy space to cushion any Omicron blow

Low vaccine coverage makes India's economy highly vulnerable to the emergence of the Omicron variant. The crumb of comfort is that there is policy space to soften some of the economic blow from a new outbreak. The fiscal position is healthier than usual for this time of year. Meanwhile, the RBI is likely to keep rates on hold in the MPC meeting next week and for a few more months beyond that.

3 December 2021

India Data Response

Manufacturing PMI (Nov.)

The jump in India’s manufacturing PMI in November suggests that the recovery is still ongoing, although it appears that global supply shortages have remained a drag. And with vaccination coverage in India still low, the threat of new virus outbreaks – either of the Omicron variant or potential successors – will continue to loom. Drop-In: India – How much scarring will the pandemic leave? 10:00 ET/15:00 GMT, Wednesday 1st December https://event.on24.com/wcc/r/3535749/63CC51718846E8FF3D871827AC84AF1E?partnerref=report Drop-In: Why is Asia sitting out the global inflation surge? 09:00 GMT/17:00 HKT, Thursday 2nd December https://event.on24.com/wcc/r/3546145/A9D34EF592141BEFCAC819ADB40359D5?partnerref=report

1 December 2021

Most Recent Alerts

16 hours ago

India Economics Update

RBI still taking baby steps towards tightening

Key Forecasts

Main Economic & Market Forecasts

% y/y unless stated

Latest

Q3 2021

Q4 2021

Q1 2022

2021

2022

2023

GDP

+8.4*

+8.4

+5.2

+5.2

+8.0

+10.5

+7.5

Consumer Prices

+4.5**

+5.1

+5.0

+5.3

+5.2

+5.5

+5.3

Current Account (4Q Sum, % of GDP)

+0.4***

-0.4

-0.6

-0.6

-0.6

-1.5

-1.7

Repo Rate %

4.00

4.00

4.00

4.00

4.00

4.50

5.00

Reverse Repo Rate %

3.35

3.35

3.35

3.35

3.35

4.00

4.75

Cash Reserve Ratio %

4.00

4.00

4.00

4.00

4.00

4.00

4.00

10-Yr Government Bond Yield %

6.35

6.22

6.25

6.25

6.25

6.50

6.50

INR/US$

75.0

74.2

75.0

75.3

75.0

76.0

77.0

Sensex

58,461

59,126

63,200

63,900

63,200

66,000

71,800

Sources: Bloomberg, CEIC, Capital Economics, *Q3; **October; ***Q2; †End of period


There is policy space to cushion any Omicron blow

India Economics Weekly

9 December 2021

Our view

Following a rapid rebound from the second virus wave, India’s economy is beginning to lose some steam. And with vaccination coverage still low, downside risks remain significant. Under these circumstances, the RBI is likely to keep policy accommodative for several months yet, particularly as inflation has not emerged as a major concern as it has done in several other EMs. Over the long term, we are increasingly worried about economic scarring from the pandemic, mainly as a result of further damage to the already-weak banking sector.

Latest Outlook

India Economic Outlook

Recovery enters a slower phase

Following a rapid rebound from the second virus wave, India’s economy is beginning to lose some steam. And with vaccination coverage still low, downside risks remain significant. Under these circumstances, the RBI is likely to keep policy accommodative for several months yet. And the longer the pandemic rumbles on, the greater the risk of the economy suffering long-term scarring.

11 October 2021