Shifting policy stimulus, PMIs, coronavirus

Satisfied that the finance ministry was doing its bit to support growth by announcing significant stimulus in the Union Budget, the RBI was able to focus on containing second-round effects from the recent surge in food inflation by keeping rates on hold this week. In stark contrast to the analyst consensus, we think that the next move in interest rates is likely to be up as growth and core inflation pick up later in the year. Admittedly, one growing risk to the outlook is the spread of - and efforts to contain - the coronavirus. There is a great deal of uncertainty, but there are reasons to think the impact this will have on India’s economy will be small.