Taking stock of our GDP forecasts

Much of the coverage of this week's Q2 GDP release highlighted the record y/y growth rate, but that was due to the slump last year rather than recent economic strength. We estimate that GDP dropped by 12% q/q in seasonally-adjusted terms. That large fall in GDP means there is more scope for the economy to have rebounded sharply in Q3. But taken as a whole, we've revised down our annual growth forecast for 2021 to 8%.
Shilan Shah Senior India Economist
Continue reading

More from India

India Economics Weekly

Reforms on the back burner, mobile tariff hikes

With key state elections coming onto the horizon, we doubt that any contentious economic reforms will be implemented during the winter session of parliament, which kicks off next week. Meanwhile, the mobile tariff hikes announced by telecoms firms this week will add to inflationary pressure. But we don't think that will spring the RBI into immediate action.     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 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

26 November 2021

India Chart Book

Backsliding on reforms?

The repeal this month of controversial reforms aimed at liberalising the agriculture sector is arguably the biggest political setback that the Modi government has faced since coming to power in 2014. And while the direct economic impact of abandoning those reforms is limited, the bigger concern is the signal that it sends about the prospects for other contentious reforms that could make a substantial difference to economic growth over the long term. Ahead of a major election early next year in Uttar Pradesh – India’s most populous state with the largest representation in the Rajya Sabha – the ruling BJP is now highly likely to shelve reforms on the labour market that would face stiff popular opposition. A poor performance from the BJP in that election may derail the reform agenda for even longer.

24 November 2021

India Economics Weekly

Sitharaman pleads, Das reassures

Finance Minister Nirmala Sitharaman this week made an impassioned plea for the private sector to ramp up investment to support the economic recovery, but we don’t think that firms will heed her call. Meanwhile, comments from RBI Governor Shaktikanta Das support our view that policy tightening will proceed very gradually and that rate hikes won’t come onto the agenda for several more months yet.

19 November 2021

More from Shilan Shah

India Data Response

GDP (Q2)

The record y/y rise in Indian GDP in Q2 (Q1 of FY21/22) was due entirely to base effects. We estimate that the economy shrank by 12% in q/q terms as India struggled with its Delta outbreak. Timely activity data point to a sharp rebound more recently as containment measures have been scaled back, but the risk of further outbreaks clouds the outlook.

31 August 2021

India Economics Update

Policy to stay loose despite first signs of MPC dissent

The minutes of the Reserve Bank’s August policy meeting show the first signs of dissent as MPC member Jayanth Varma argued that a hike in the reverse repo rate and a change in policy stance would be prudent to show that the committee remains committed to reining in inflation. But most members – including Governor Shaktikanta Das – appear more concerned about the downside risks to the economic recovery. That supports our view that policy will remain loose for a long while yet.

23 August 2021

India Economics Weekly

The broad contours of policy normalisation

We’ve argued for some time that the RBI is in no rush to join several of its emerging market peers in tightening monetary policy, a view that has been reinforced by the dovish commentary in the latest RBI bulletin released this week. The bulletin also hints that, whenever it does begin, policy normalisation will be very gradual. We think it will start with the slow removal of liquidity support before rates are increased.

20 August 2021
↑ Back to top