India

India Data Response

Manufacturing PMI (Jul.)

The sharp rebound in India’s manufacturing PMI in July adds to evidence that the economy has been staging a strong recovery ever since the second virus wave receded. But with vaccine coverage still low, sustained improvements are far from guaranteed.  

2 August 2021

India Data Response

Core Infrastructure Industries (Jun.)

India’s core infrastructure industries index rebounded in seasonally-adjusted m/m terms in June, suggesting that an industrial recovery is well underway.

30 July 2021

India Economics Weekly

Bankruptcy code upgrade, RBI meeting

The amendments to the Insolvency and Bankruptcy Code (IBC) that were approved in the Lok Sabha (lower house of parliament) this week could provide much-needed support to India’s banking sector. But there's no guarantee that they will pass through the Rajya Sabha. Next week, we think interest rates will be left unchanged at the conclusion of the RBI's policy meeting on Friday as it remains focused on supporting the economic recovery.
 

30 July 2021

Key Forecasts

Main Economic & Market Forecasts

% y/y unless stated

Latest

Q2 2021

Q3 2021

Q4 2021

2021

2022

2023

GDP

+1.6*

+29.5

+12.5

+5.8

+11.0

+9.0

+8.0

Consumer Prices

+6.3**

+5.6

+5.8

+4.8

+5.3

+5.8

+5.5

Current Account (4Q Sum, % of GDP)

+0.9*

+0.1

-0.8

-1.0

-1.0

-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 %

6.20

6.05

6.25

6.25

6.25

6.50

6.50

INR/US$

74.3

74.4

74.5

75.0

75.0

76.0

77.0

Sensex

52,654

52,483

53,500

54,700

54,700

60,700

64,500

Sources: Bloomberg, CEIC, Capital Economics *Q1; **June; †End of period


Bankruptcy code upgrade, RBI meeting

India Economics Weekly

3 August 2021

Our view

The economic damage caused by the second virus wave has been limited compared to last year and, with activity now turning a corner alongside falling new infections, we expect the recovery to get back on track over the coming quarters. But with states still cautious over lifting restrictions and the vaccine rollout slow going, the rebound will be more gradual than when the initial outbreak subsided. Under these circumstances, the RBI is likely to keep policy very accommodative for a long while yet.

Latest Outlook

India Economic Outlook

Rebound underway, but relapse risks grow

India’s ferocious second virus wave is subsiding as quickly as it emerged, enabling the recovery to get back on track. However, the rapid scaling back of containment measures that is underway increases the threat of further outbreaks. And beyond the initial reopening bounce, the weakness of the banking sector will also weigh on the recovery. Under these circumstances, the RBI is likely to tolerate a bout of higher inflation and keep policy loose over the next year.

1 July 2021