Asset sales delay will create a fiscal hole

The postponement of the planned privatisation of two state-owned banks to next year has dealt an all-too-familiar blow to the Finance Ministry’s hopes of raising significant revenues from asset sales in FY21/22. Rather than relaxing the overall fiscal deficit target, we expect the Finance Ministry to opt to make up for the revenue shortfall by reducing spending, which would weigh on the economic recovery.
Shilan Shah Senior India Economist
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India Economics Weekly

Domestic needs limit prospects for vaccine exports

India is planning to resume exporting COVID-19 vaccines from October, which should help to further boost the trade position. But with vaccination coverage still low, the domestic vaccine rollout will continue to take priority. Vaccine shipments from India therefore won’t be enough to shift the needle for rollouts in other poor EMs.

24 September 2021

India Chart Book

Global index inclusion would marginally boost bonds

Speculation is building that India will be included in major global bond indices over the next year or so. If that happens, it would highlight the local bond market’s growing maturity and be cast as a coup by the government, for which bond index inclusion has long been a stated policy aim. With vast amounts of assets tracking global indices, this would leave scope for a rise in portfolio inflows. To be clear, with India’s weighting in any global index likely to be small and increased only gradually, the impact is more likely to be marginal than transformational. Nevertheless, bond index inclusion would still bolster our view that, supported by a commitment from the RBI to keep policy very accommodative, Indian bond yields should only rise very slightly over the next 18 months even in an environment of higher US Treasury yields.   Drop-In: Evergrande – What are the risks to China and the world? Chief Asia Economist Mark Williams and Senior China Economist Julian Evans-Pritchard will be joined by Senior Markets Economist Oliver Jones to take your questions about the Evergrande situation. They’ll be covering the implications of collapse for China’s financial system and growth outlook, and assessing the global markets fallout. Register here for the 0900 BST/1600 HKT session on Thursday, 23rd September.

22 September 2021

India Economics Focus

A dive into the National Infrastructure Pipeline

The Indian government’s aim to significantly ramp up infrastructure investment through its flagship National Infrastructure Pipeline (NIP) has suffered less disruption than might have been expected during the pandemic. That is a positive for long-term growth prospects. But significant headwinds – including the weakness of the banking sector and land acquisition constraints – will prevent the NIP from having a transformational impact on the Indian economy.

20 September 2021

More from Shilan Shah

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

RBI Watch

RBI in no rush to tighten

Policy rates are highly likely to be left unchanged at the conclusion of the RBI’s upcoming MPC meeting on 6th August, particularly given that inflation now appears to have peaked. Further ahead, we don’t anticipate any tightening for several more months. And when policy normalisation does proceed, it is likely to be gradual, perhaps starting with the slow removal of liquidity support before policy rates are increased.

29 July 2021

India Economics Weekly

Activity comes storming back

One key lesson from the past 18 months is that economies can rebound quickly once virus waves have subsided. Even with this mind, the pace at which activity in India has rebounded from its second wave has been remarkable. But the rapid reopening raises the prospect of renewed outbreaks, potentially with more contagious variants.

23 July 2021
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