Virus disruption will leave severe and lasting scars

India’s economy is all but certain to contract this year for the first time since 1979. And the government’s reluctance to respond to the coronavirus crisis as aggressively as those elsewhere means that the recovery will be slow too, as household and corporate incomes and bank balance sheets will all suffer lasting damage. We think the economy will be 7% smaller in real terms at the end of 2022 than would have been the case had the virus not existed.
Shilan Shah Senior India Economist
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India Economics Weekly

Reforms on the back burner, mobile tariff hikes

With key state elections coming onto the horizon, we doubt that any contentious economic reforms will be implemented during the winter session of parliament, which kicks off next week. Meanwhile, the mobile tariff hikes announced by telecoms firms this week will add to inflationary pressure. But we don't think that will spring the RBI into immediate action.     Drop-In: Why is Asia sitting out the global inflation surge? 09:00 GMT/17:00 HKT, Thursday 2nd December Drop-In: India – How much scarring will the pandemic leave? 10:00 ET/15:00 GMT, Wednesday 1st December

26 November 2021

India Chart Book

Backsliding on reforms?

The repeal this month of controversial reforms aimed at liberalising the agriculture sector is arguably the biggest political setback that the Modi government has faced since coming to power in 2014. And while the direct economic impact of abandoning those reforms is limited, the bigger concern is the signal that it sends about the prospects for other contentious reforms that could make a substantial difference to economic growth over the long term. Ahead of a major election early next year in Uttar Pradesh – India’s most populous state with the largest representation in the Rajya Sabha – the ruling BJP is now highly likely to shelve reforms on the labour market that would face stiff popular opposition. A poor performance from the BJP in that election may derail the reform agenda for even longer.

24 November 2021

India Economics Weekly

Sitharaman pleads, Das reassures

Finance Minister Nirmala Sitharaman this week made an impassioned plea for the private sector to ramp up investment to support the economic recovery, but we don’t think that firms will heed her call. Meanwhile, comments from RBI Governor Shaktikanta Das support our view that policy tightening will proceed very gradually and that rate hikes won’t come onto the agenda for several more months yet.

19 November 2021

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Emerging Markets Economics Update

The vaccine tide is slowly turning

A likely flood of exports from India and China, as well as a ramping up of donations from the US, should help to significantly boost vaccine supply for the many poor EMs in Africa and South and South East Asia whose vaccine rollouts lag behind. That said, logistical constraints and, to a lesser extent, vaccine hesitancy are likely to prove new headwinds to rollouts.

6 October 2021

RBI Watch

Rate hikes remain a distant prospect

Policy rates are highly likely to be left unchanged at the conclusion of the RBI’s upcoming MPC meeting on Friday 8th October, particularly given the recent drop in inflation. The committee might announce further measures to drain liquidity from the banking sector, but these will probably not amount to anything more than marginal tweaks. The big picture is that policy will remain very accommodative for several months yet.

29 September 2021

Emerging Markets Economics Update

Lat Am leads the EM tightening cycle

Several EM central banks have raised interest rates in the past couple of months on the back of growing inflation concerns (including many in Latin America) and/or strong economic recoveries (parts of Central Europe, Korea). Hiking cycles look set to continue for a while longer, with Latin America likely to tighten most aggressively. Bucking the trend is much of Asia, where – with the exception of Korea – policy tightening still looks some way off.

23 September 2021
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