Industry stalling as services reopens further

The impact of global semiconductor shortages on India’s auto sector was evident in the lacklustre industrial production data for August released this week. And with energy supply constraints also worsening, the outlook for industry is deteriorating. Meanwhile, services-specific containment measures were scaled back further this week, but the gains are likely to be small.
Darren Aw Asia Economist
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India Economics Weekly

There is policy space to cushion any Omicron blow

Low vaccine coverage makes India's economy highly vulnerable to the emergence of the Omicron variant. The crumb of comfort is that there is policy space to soften some of the economic blow from a new outbreak. The fiscal position is healthier than usual for this time of year. Meanwhile, the RBI is likely to keep rates on hold in the MPC meeting next week and for a few more months beyond that.

3 December 2021

India Data Response

Manufacturing PMI (Nov.)

The jump in India’s manufacturing PMI in November suggests that the recovery is still ongoing, although it appears that global supply shortages have remained a drag. And with vaccination coverage in India still low, the threat of new virus outbreaks – either of the Omicron variant or potential successors – will continue to loom. Drop-In: India – How much scarring will the pandemic leave? 10:00 ET/15:00 GMT, Wednesday 1st December https://event.on24.com/wcc/r/3535749/63CC51718846E8FF3D871827AC84AF1E?partnerref=report Drop-In: Why is Asia sitting out the global inflation surge? 09:00 GMT/17:00 HKT, Thursday 2nd December https://event.on24.com/wcc/r/3546145/A9D34EF592141BEFCAC819ADB40359D5?partnerref=report

1 December 2021

RBI Watch

MPC to hold rates in face of Omicron uncertainty

Whereas many EM central banks have been hiking rates aggressively, the RBI has been taking only baby steps towards policy tightening over the past couple of months. And the emergence of the Omicron COVID-19 variant only reinforces our view that it will continue to move very cautiously. In all, we think the MPC will announce further small measures to drain liquidity from the banking sector at the conclusion of its policy meeting on Wednesday 8th December as it continues to lay the groundwork for policy rate hikes from mid-2022.   Drop-In: India – How much scarring will the pandemic leave? 10:00 ET/15:00 GMT, Wednesday 1st December https://event.on24.com/wcc/r/3535749/63CC51718846E8FF3D871827AC84AF1E?partnerref=report Drop-In: Why is Asia sitting out the global inflation surge? 09:00 GMT/17:00 HKT, Thursday 2nd December https://event.on24.com/wcc/r/3546145/A9D34EF592141BEFCAC819ADB40359D5?partnerref=report

1 December 2021

More from Darren Aw

India Data Response

Wholesale Prices (Sep.)

Headline WPI inflation dropped to a five-month low in September on the back of a fall in food and fuel inflation, both of which are likely to continue easing. And with the recent drop in consumer price inflation also having further to run, we remain confident in our view that policy rate hikes won’t be coming back onto the agenda until the middle of next year.

14 October 2021

India Data Response

Consumer Prices (Sep.) & Industrial Production (Aug.)

India’s consumer price inflation dropped further below the 6% ceiling of the RBI’s inflation target range in September, and we expect it to remain there for several more months. That’s one reason to think that policy normalisation is unlikely before the middle of next year. Our view is more dovish than consensus.

12 October 2021

India Economics Update

Rate hikes remain a distant prospect

The Reserve Bank kept the repo rate on hold at a record low today and stressed that its latest liquidity-withdrawal measures do not constitute policy tightening. Given our view that the recovery will only be back on more solid footing next year, we continue to think that rate hikes are still a long way off.

8 October 2021
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