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Consumer Prices (May)

India’s consumer price inflation jumped to a six-month high in May on the back of an unexpected surge in core inflation, which we suspect is a result of rising commodity prices now seeping into retail prices. But that should reverse soon enough and in turn pull the headline rate down over the coming months.
Darren Aw Asia Economist
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India Economics Update

A small helping hand for households

Measures unveiled by Finance Minister Nirmala Sitharaman over the weekend including a cut to excise duties on petrol and ramping up of fertiliser subsidies should offer a small reprieve to households dealing with the sharp rise in fuel and food prices. But the measures won’t be enough to prevent further rises in inflation over the coming months, and will come at the cost of a slightly wider fiscal deficit this year. Asia Drop-In (26th May, 0900 BST/16:00 SGT): Can Asia remain the low inflation exception? Join our 20-minute briefing about the region’s price and policy outlooks. Register here.

23 May 2022

India Economics Weekly

Heatwave damage, MPC minutes, WPI surge

The government’s decision to restrict exports of wheat following heavy damage to crops from the heatwave will have limited impact on the trade balance and inflation. The bigger worry is that the extreme heat will do broader damage to other rabi (winter) crop. Meanwhile, the minutes of the RBI’s unscheduled meeting this month show that several MPC members are keen on frontloading rate hikes to rein in inflation expectations. That supports our view that the repo rate will be hiked by 50bp in the next meeting in June.
Asia Drop-In (26th May, 0900 BST/16:00 SGT): Can Asia remain the low inflation exception? Join our 20-minute briefing about the region’s price and policy outlooks. Register here.

20 May 2022

India Economics Weekly

G-SAP redux?

The recent jump in bond yields is reportedly causing consternation among policymakers. The big worry is the impact that higher bond yields would have on the trajectory of India’s public debt. This sets the stage for more financial repression policies and a potential return of the RBI’s so-called “G-SAP” – the programme introduced last year in which it made regular purchases of government bonds on the secondary market.
EM Drop-In (17th May): Do current EM debt strains point to a repeat of the kinds of crises seen in the 1980s and 1990s? Join our special briefing on EM sovereign debt risk on Tuesday. Register now.

13 May 2022

More from Darren Aw

India Economics Update

A closer look at India’s vaccine supply projections

The government’s latest vaccine supply projections suggest that India could fully vaccinate all adults by year end. But that hinges on optimistic assumptions about production and distribution. Unless supply and logistical issues constraining the rollout are swiftly resolved, the risk of fresh outbreaks will remain a significant threat to the recovery.

7 July 2021

India Data Response

Services & Composite PMI (Jun.)

The drop in India’s PMI readings for June should soon reverse as the second virus wave has subsided and restrictions are being eased. But a rapid reopening increases the risks of fresh outbreaks, which could throw the recovery off course once more.

5 July 2021

India Economics Weekly

Taking stock of the latest fiscal package

The new fiscal package announced by Finance Minister Nirmala Sitharaman this week will only have a limited impact on both the central budget deficit and demand. It appears that the government feels it is already close to the limit in terms of what it can do to directly support the economic recovery.

2 July 2021
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