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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.
Shilan Shah Senior India Economist
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India Economics Update

A small helping hand for households

Measures unveiled by Finance Minister Nirmala Sitharaman over the weekend including a cut to excise duties on petrol and ramping up of fertiliser subsidies should offer a small reprieve to households dealing with the sharp rise in fuel and food prices. But the measures won’t be enough to prevent further rises in inflation over the coming months, and will come at the cost of a slightly wider fiscal deficit this year. Asia Drop-In (26th May, 0900 BST/16:00 SGT): Can Asia remain the low inflation exception? Join our 20-minute briefing about the region’s price and policy outlooks. Register here.

23 May 2022

India Economics Weekly

Heatwave damage, MPC minutes, WPI surge

The government’s decision to restrict exports of wheat following heavy damage to crops from the heatwave will have limited impact on the trade balance and inflation. The bigger worry is that the extreme heat will do broader damage to other rabi (winter) crop. Meanwhile, the minutes of the RBI’s unscheduled meeting this month show that several MPC members are keen on frontloading rate hikes to rein in inflation expectations. That supports our view that the repo rate will be hiked by 50bp in the next meeting in June.
Asia Drop-In (26th May, 0900 BST/16:00 SGT): Can Asia remain the low inflation exception? Join our 20-minute briefing about the region’s price and policy outlooks. Register here.

20 May 2022

India Economics Weekly

G-SAP redux?

The recent jump in bond yields is reportedly causing consternation among policymakers. The big worry is the impact that higher bond yields would have on the trajectory of India’s public debt. This sets the stage for more financial repression policies and a potential return of the RBI’s so-called “G-SAP” – the programme introduced last year in which it made regular purchases of government bonds on the secondary market.
EM Drop-In (17th May): Do current EM debt strains point to a repeat of the kinds of crises seen in the 1980s and 1990s? Join our special briefing on EM sovereign debt risk on Tuesday. Register now.

13 May 2022

More from Shilan Shah

India Economics Weekly

Vaccine rollout struggling for momentum

Concerns continue to build over a new virus wave in India and adding to the worry is the sluggish pace of the vaccine rollout. The government has this week taken steps to boost supply, but they are unlikely to bring forward by much the point at which enough people are fully vaccinated to mitigate the damage of a fresh outbreak.

13 August 2021

Frontier Markets Monthly Wrap

Outlook darkens

The disbursement of Special Drawing Rights (SDRs) from the IMF later this month is a boon for some Frontier Markets that face very high borrowing costs. But beyond this, it is hard to find many positives for Frontiers. The spread of the Delta variant, coupled with extremely low vaccine coverage, is a major concern. And the slowdown in China is also likely to weigh on growth of metal producers.

10 August 2021

Emerging Markets Economics Update

The Delta variant and EM tourism troubles

The rapid spread of the Delta variant of the coronavirus adds to reasons to think that lacklustre economic recoveries lie in store for tourism-dependent economies in Africa, parts of the Middle East and South-East Asia. The weakness of tourism also threatens to add to balance of payments strains in a handful of EMs – particularly Tunisia, but also Turkey and Sri Lanka.

4 August 2021
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