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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.
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

Widening trade deficit no major concern

The widening in India’s goods trade deficit in July was due in large part to the continued rebound in imports as containment measures were scaled back further. The trade deficit may widen a little further over the coming months but the big picture is that external risks look limited.

16 August 2021

India Data Response

Consumer Prices (Jul.) & Industrial Production (Jun.)

India’s consumer price inflation dropped below the 6% upper limit of the RBI’s target range in July, and we think further falls are likely. With the economy also still weak, there should be little doubt that the central bank will be keeping policy rates on hold for some time to come.

12 August 2021

India Economics Update

RBI in no rush to tighten policy

The Reserve Bank kept the repo rate on hold at a record low today and announced plans to ramp up government bond purchases on the secondary market, underlining its commitment to supporting the economic recovery. We don’t expect policy normalisation to begin until well into next year.

6 August 2021
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