Manufacturing PMI (Aug.)

The drop in India’s manufacturing PMI in August is probably just a sign of activity normalising following the strong pace of recovery in recent months. But the threat of further virus waves remains a significant downside risk to the outlook.
Darren Aw Asia Economist
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India Economics Weekly

Omicron surging, asset sales progressing

COVID-19 cases in India are still surging. But the early indications are that healthcare systems are not under significant pressure, and we’re hopeful that India’s third wave will peak before long. Even if it doesn’t, the better-than-expected fiscal performance over recent months means that there is policy space for the government to intervene.  

14 January 2022

India Data Response

Consumer Prices (Dec.) & Industrial Production (Nov.)

Indian consumer price inflation took a big step towards the 6% ceiling of the RBI’s target range in December. We think it will breach the ceiling soon and that the RBI will remove some policy support. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

12 January 2022

India Economics Weekly

Cautious optimism despite oncoming Omicron wave

India is about to be hit by a huge Omicron wave. New COVID infections have surged fifteen-fold in the last two weeks. But we’re optimistic that the economy will prove more resilient than it has in the past. And South Africa’s experience with Omicron provides some reassurance that the outbreak could be brief.

7 January 2022

More from Darren Aw

India Economics Weekly

Kerala concerns, Sensex surge

Headline numbers suggest that the recent virus outbreak in Kerala has been brought under control, but that seems to be in large part a reflection of a sharp fall in testing. And with vaccination coverage still low, the risk of new national virus waves continues to loom. That is probably the key risk to our view that the rally in Indian equities - which hit a record high this week - has further to run.

27 August 2021

India Chart Book

Capital outflows would be no major macro concern

Foreign portfolio outflows from Indian financial markets have been easing this month, bucking the broader EM trend. This may have been driven in part by the improvement in the virus situation. Looking ahead, the growing likelihood of the US Fed beginning to taper its asset purchases this year and an accompanying rise in US Treasury yields could reignite foreign outflows from Indian assets (as well as other EMs). But if they do pick up, India’s economy is much better placed to cope with a sustained bout of capital outflows than it has been in the past, most notably during the “Taper Tantrum” of 2013. After all, the current account is in surplus, FX reserves are close to all-time highs and the rupee does not look overvalued. One consequence of this is that the RBI will not rush to tighten monetary policy.

25 August 2021

India Data Response

Wholesale Prices (Jul.)

The drop in India’s headline wholesale price inflation in July came on the back of an easing in fuel and food inflation, both of which have further to run. And with headline CPI inflation having already peaked, we remain comfortable with our view that policy rate hikes will not come onto the agenda until well into next year.

16 August 2021
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