Manufacturing PMI (Jul.)

The sharp rebound in India’s manufacturing PMI in July adds to evidence that the economy has been staging a strong recovery ever since the second virus wave receded. But with vaccine coverage still low, sustained improvements are far from guaranteed.  
Darren Aw Asia Economist
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India Economics Weekly

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.

17 September 2021

India Economics Update

Three points on banking sector liquidity

Measures by the Reserve Bank to drain banking sector liquidity have caught attention over the past few days. But with liquidity still abundant, interbank rates at the very bottom of the rate corridor and financial conditions exceptionally loose, these measures represent marginal tweaks rather than a tightening of policy.

14 September 2021

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

More from Darren Aw

India Data Response

Core Infrastructure Industries (Jun.)

India’s core infrastructure industries index rebounded in seasonally-adjusted m/m terms in June, suggesting that an industrial recovery is well underway.

30 July 2021

India Chart Book

Inflation has now peaked

Amid the ongoing debate over inflation in a post-pandemic world, one thing that does appear clear is that near-term price pressures in India have peaked. Consumer price inflation held steady in June at 6.3% y/y, while wholesale price inflation dropped for the first time since December. Daily data show that, despite concerns in some states over lower-than-expected monsoon rains, food price inflation has eased further so far in July. And with last year’s rebound in global oil prices now entering the annual comparison, vehicle fuel inflation – which unusually is included in the RBI’s core measure of inflation – is likely to have dropped too. If we are right in thinking that inflation has peaked, the RBI is unlikely to withdraw policy support for a long while yet as it remains firmly focussed on supporting the economic recovery.

21 July 2021

India Economics Update

Wider trade deficit won’t threaten external position

The widening in India’s goods trade deficit in June came on the back of a rebound in imports amid the lifting of containment measures and the recent rally in global oil prices. But while the economic recovery has further to run, we think that oil prices will soon peak, which should help to limit external risks.

16 July 2021
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