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
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India Data Response

Industrial Production (Apr.)

There is unlikely to be a clearer illustration of the distorting impact of base effects than the 134% y/y rise reported in Indian industrial production in April. Industrial output actually dropped in April as a second wave of infections hit activity. But the lockdown last year was far more severe than this year’s. Looking ahead, the economic recovery is also likely to be more gradual than that seen a year ago.

11 June 2021

India Economics Weekly

Monsoon puts a cloud over vaccine rollout

The monsoon season has begun in India and the extent of the rains has a significant impact on the incomes of hundreds of millions of families given the high level of employment in agriculture. A good monsoon can help to anchor food prices too. However, this year's monsoon risks holding back the economy if it adds to the logistical constraints facing the vaccine rollout.

11 June 2021

India Economics Update

Resilient remittances will aid the recovery

Remittance flows into India have been resilient in recent months and, with employment prospects for Indian migrants looking better than a year ago, they should continue to hold up well. That should provide some much-needed support for the economic recovery.

9 June 2021

More from Shilan Shah

India Data Response

GDP (Q1)

The smaller than expected rise in Indian GDP in Q1 will be followed by a significant contraction in Q2 caused by the virus surge and tightening of containment measures. While the real-time activity data have bottomed out over the past couple of weeks, the outlook remains clouded by downside risks.

31 May 2021

RBI Watch

Policy to remain loose for a long time yet

We agree with financial markets and the analyst consensus that policy rates will be left on hold at the conclusion of the RBI’s upcoming MPC meeting on 4th June, particularly given that the worst of the current virus wave now appears to be over. But any recovery will remain fragile, especially while the vaccine rollout remains stuck in first gear. So even as some EM central banks look to begin normalising policy later this year, the RBI is likely to keep rates unchanged for a long while yet.

27 May 2021

Emerging Markets Economics Update

EMs: a helping hand from migrants

Remittances into EMs were surprisingly resilient last year and should continue to hold up over the coming quarters. The outlook is strongest in Mexico and parts of South East Asia, due to the recovery prospects for the US economy. In contrast, the risk of a slowdown in remittances from the Gulf threatens to exacerbate balance of payments strains in parts of the Middle East, North Africa and Sri Lanka.

25 May 2021
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