MPC minutes suggest policy tightening a long way off

The minutes of the Reserve Bank’s April policy meeting – in which interest rates were left unchanged – show that the MPC is committed to keeping policy accommodative to support the economic recovery. The surge in virus cases since that meeting is only likely to have strengthened its resolve. Markets are too hawkish in discounting rate hikes over the next 12 months.
Shilan Shah Senior India Economist
Continue reading

More from India

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

India Economics Weekly

Telecoms lifeline, autos constraints, bank liquidity

India's struggling telecoms firms were thrown a lifeline this week after parliament approved a four-year moratorium on dues owed to the government. One potential consequence is that telecoms firms are required to raise prices in order to lift revenues, which would boost inflation. Meanwhile, global semiconductor shortages have been weighing on India's auto sector, which will prove a headwind to the broader industrial recovery.

17 September 2021

More from Shilan Shah

India Economic Outlook

Rebound underway, but relapse risks grow

India’s ferocious second virus wave is subsiding as quickly as it emerged, enabling the recovery to get back on track. However, the rapid scaling back of containment measures that is underway increases the threat of further outbreaks. And beyond the initial reopening bounce, the weakness of the banking sector will also weigh on the recovery. Under these circumstances, the RBI is likely to tolerate a bout of higher inflation and keep policy loose over the next year.

1 July 2021

Emerging Markets Trade Monitor

EM exports may be peaking

EM goods exports have surged in Q2. There are some early indications that EM exports will now come off their record highs, but they are still likely to stay at elevated levels throughout the rest of the year.

24 June 2021

India Economics Update

How much further will inflation rise?

The recent jump in India’s consumer price inflation has taken us (and most others) by surprise and we have revised up our near-term forecasts. However, a big chunk of the surge – even in the most closely-watched core measure – can be explained by rising global commodity prices, which we think has largely run its course. Further ahead, a (likely) strong monsoon harvest and a still-large output gap should help to anchor headline inflation and relieve pressure on the RBI to tighten policy any time soon.

22 June 2021
↑ Back to top