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Implications of a weak monsoon

This year’s monsoon has so far been weaker than usual. This won’t have as big an economic impact as it would have a couple of decades ago. But it will harm employment and energy production. Some comfort can be taken from the fact that food inflation is likely to remain anchored even if the monsoon rains do remain low, which should allow the RBI to keep policy loose.
Darren Aw Asia Economist
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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.

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Consumer Prices (Apr.) & Industrial Production (Mar.)

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12 May 2022

India Economics Update

RBI intervention will support the rupee

The Indian rupee hit a record low against the US dollar today, but the big picture is that RBI intervention has helped it hold up better than most EM currencies recently. Given that the RBI has ample FX reserves, we expect the rupee to remain more stable and weaken less than most other EM currencies against the greenback over the next couple of years.

In view of the wider interest, we are also sending this India Economics Update to clients of our FX Markets Service.

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More from Darren Aw

India Data Response

Services & Composite PMI (Aug.)

The sharp rises in India’s services and composite PMI readings in August support our view that the economy has staged a strong rebound in Q3. But downside risks remain significant as the threat of further virus waves continues to loom.

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India Data Response

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.

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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
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