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Manufacturing PMI (Nov.)

The jump in India’s manufacturing PMI in November suggests that the recovery is still ongoing, although it appears that global supply shortages have remained a drag. And with vaccination coverage in India still low, the threat of new virus outbreaks – either of the Omicron variant or potential successors – will continue to loom. 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 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
Darren Aw Asia 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 Darren Aw

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 Data Response

Wholesale Prices (Oct.)

The jump in headline wholesale price inflation in October was due almost entirely to higher commodity prices, but we think they are now close to peaking. While the RBI will be wary that wholesale prices remain elevated, there’s still scope to keep policy accommodative given the much lower rate of headline CPI inflation.

15 November 2021

India Data Response

Consumer Prices (Oct.) & Industrial Production (Sep.)

India’s consumer price inflation edged up in October but remained well below the 6% ceiling of the RBI’s inflation target range. And we expect it to stay there for several months yet, which underpins our view that policy tightening is still some way off.

12 November 2021
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