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.
Darren Aw Asia Economist
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India Economics Weekly

Billionth vaccine masks worrying slowdown in rollout

India this week administered its billionth COVID-19 vaccine dose, but that figure masks a worrying recent slowdown in the vaccination drive. And as a share of the population, the number of fully vaccinated individuals remains low. For now, the economy still looks vulnerable to the threat of further virus outbreaks.

22 October 2021

India Chart Book

RBI in no hurry to withdraw policy support

The latest activity data suggest that India's recovery has entered a slower phase, with global supply shortages starting to weigh on the economy too. In addition, India’s vaccination coverage remains low, leaving the economy exposed to the threat of further virus outbreaks. All of this underscores the need for the RBI to keep policy supportive. Indeed, the Bank said in its monthly bulletin this week that India “is still digging out of one of the deepest contractions to hit any major economy during the pandemic”. The report concluded that “policy support for a sustained and inclusive recovery may be needed for longer”. While further steps will be taken to gradually withdraw banking sector liquidity, we expect monetary policy to remain accommodative for several more months.

20 October 2021

India Economics Weekly

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.

15 October 2021

More from Darren Aw

India Data Response

Wholesale Prices (Aug.)

Following the weaker-than-expected consumer price inflation data for August released yesterday, headline wholesale price inflation data released today surprised to the upside. But it should resume dropping before long, particularly if commodity prices fall back as we expect. In all, there’s little in the August inflation data to pressure the RBI to start tightening policy.

14 September 2021

India Data Response

Consumer Prices (Aug.)

The drop in India’s consumer price inflation in August was driven by a continued fall in food inflation. We expect a broader easing in price pressures to bring headline inflation further below the 6% upper limit of the RBI’s target range over the coming months, so we remain comfortable with our view that policy rates will be kept on hold for a while longer.

13 September 2021

India Economics Update

Implications of a weak monsoon

This year’s monsoon has so far been weaker than usual. This won’t have as big an economic impact as it would have a couple of decades ago. But it will harm employment and energy production. Some comfort can be taken from the fact that food inflation is likely to remain anchored even if the monsoon rains do remain low, which should allow the RBI to keep policy loose.

7 September 2021
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