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More concessions may be coming One of the major talking points from our recent meetings with clients, policymakers and contacts in India was (unsurprisingly) the threat of Trump tariffs. As we noted here, India is one of the most exposed countries …
28th February 2025
Economy slowly emerging from soft patch GDP figures for Q4 2024 show that India’s economy remained fairly soft by its own standards at the end of last year. But with policy now decisively turning more supportive, economic growth should pick up further …
India’s economy is in the midst of a softer patch which we think will continue for a few more quarters. Headline CPI inflation is now within touching distance of the Reserve Bank’s 4% target and looks set to continue easing over the coming months. The RBI …
26th February 2025
A week spent visiting clients, policymakers and contacts in India underlines that the digital economy is thriving, that there is hope that India will not be hit hard by Trump’s tariffs, and that much-needed improvements in macroeconomic data reporting …
25th February 2025
Weaker rupee is not a big macro threat Under new leadership, the Reserve Bank appears to have taken a more flexible approach to exchange rate management. Amid broad dollar strength, that has meant that the rupee has fallen by more in the past two …
21st February 2025
The decision by the US and Russia to “lay the groundwork” to end the war in Ukraine marks a potentially significant turning point after three years of conflict. Negotiations will take time and the macroeconomic implications will depend on the features of …
18th February 2025
Five years on from start of the pandemic, one of the big economic legacies in India is the adoption of digital payments, driven by mobile apps and the Unified Payments Interface (UPI). This increased digitalisation broadens the tax base, expands lending …
Reacquainted amid tariff threat Looming large over this week’s meeting between PM Modi and President Trump was the latter’s threat of reciprocal tariffs on trading partners. Just before the meeting began, Trump said the new tariffs will take into …
14th February 2025
Inflation falls sharply, more rate cuts on the cards The sharp fall in Indian headline consumer price inflation in January reinforces our view that the RBI will continue to loosen monetary policy over the coming months to support the economy. The headline …
12th February 2025
A slowdown in the economy, alongside an unfavourable external environment, have contributed to declines in the Indian stock market and the rupee. We continue to expect the stock market to fall further and we now expect a further decline for the Indian …
Fiscal restraint, monetary easing It’s been a busy week on the domestic policymaking front. The FY25/26 Union Budget contained some tax breaks aimed at boosting household consumption, but fiscal prudence was still very much the order of the day: the …
7th February 2025
The Reserve Bank of India’s (RBI’s) decision to cut the repo rate by 25bps today to 6.25% confirms that, under new leadership, its priorities have tilted from containing inflation to providing more support for the economy. We think a further 75bps of cuts …
New governor kicks off easing cycle The Reserve Bank of India’s (RBI’s) decision to cut the repo rate by 25bps today to 6.25% confirms that, under new leadership, its priorities have tilted from containing inflation to providing more support for the …
Tax breaks included in India’s FY25/26 Union Budget announcement should provide some support to household consumption but, overall, the measures fall some way short of constituting major stimulus. There is always a chance of slippage, but the Finance …
1st February 2025
Trump 2.0 and India Prime Minister Modi and US President Donald Trump this week spoke for the first time since Trump’s inauguration. Details of the call are scant, but the talks appear to have been relatively conciliatory – PM Modi referred to Trump as …
31st January 2025
Easing inflation and recent liquidity injections suggest a cut to policy rate next week Rupee weakness is not a major risk to policy outlook We expect 100bps of cuts this easing cycle, a more dovish view than the consensus The announcement of large …
29th January 2025
India’s outbound tourism market is poised to become one of the world’s largest over the coming years. The Maldives and the UAE are arguably the biggest beneficiaries, though Oman and Thailand are well placed to take advantage too. Other EMs – particularly …
27th January 2025
Impact of 10% tariff on India would be small Although President Trump mentioned tariffs only briefly in his inauguration address, the White House released a memorandum soon after setting out the administration’s broad plans. As we explained here , …
24th January 2025
After a stellar run, India’s economy has entered a softer patch that will continue for a few more quarters. We think that will portend an underperformance in local equities relative to other major benchmarks. Headline CPI inflation has fallen back within …
22nd January 2025
Hopes that Finance Minister Nirmala Sitharaman will deliver a big fiscal package to get the economy out of its recent soft patch in the upcoming Union Budget are likely to be disappointed. Some more accommodative tax and spending measures are on the …
President Donald Trump for now at least appears to be in favour of the H-1B visa scheme, a key route for Indians to work in the US tech sector, but the scheme is a key source of friction among his supporters. If restrictions around H-1B visas are …
21st January 2025
More rupee weakness a sign of shifting priorities Data released this week showed that headline consumer price inflation fell from 5.5% y/y in November to 5.2% y/y in December. (See Chart 1.) Our initial response to the data can be read here . Food …
17th January 2025
The Shape of the Fractured World in 2025 The share of the fracturing global economy that is accounted for by China and its geopolitical allies contracted in 2024, leaving it under a third the size of the US bloc at the start of 2025. This fall was in part …
If Donald Trump were to impose a universal 10% tariff on US imports, we wouldn’t expect widespread reshoring of manufacturing production back to the US. And if it were accompanied by a 60% tariff on Chinese imports, the main beneficiaries would be other …
14th January 2025
Fall in headline inflation boosts February rate cut odds The further moderation in Indian headline consumer price inflation in December supports our view that the monetary easing cycle will kick off at the RBI’s next policy meeting in February. The …
13th January 2025
Greater rupee volatility hints at shift in FX strategy The Indian rupee was one of the most stable EM currencies against the US dollar in 2024. (See Chart 1.) That is in large part by design – the Reserve Bank of India (RBI) has a policy of intervening …
10th January 2025
The Cold War was defined by geopolitical blocs – the Soviet or Eastern bloc against the Western bloc. Geopolitics retreated with the collapse of the Soviet Union. The period from the early-1990s to the early-2010s was instead an era of globalisation: most …
7th January 2025
Donald Trump’s second term could redraw the global geopolitical map. A sustainable “Grand Bargain” with China, warmer relations with Russia, or a breakdown in the relationship between the US and its traditional allies could each reshape supply chains and …
The further slump in net foreign direct investment (FDI) inflows into India last year seems in large part a reflection of still-high global interest rates. One implication therefore is that the slump will reverse now that global monetary policy is being …
Better data at the end of the year India’s economy is ending 2024 looking a little healthier than it had been. The flash editions of the manufacturing and the services PMIs both rose in the December readings that were published this week. (See Chart 1.) …
20th December 2024
17th December 2024
New RBI leadership and inflation drop tips balance Two big developments this week have tipped the odds in favour of a repo rate cut at the RBI’s next meeting in February, or potentially even in an unscheduled meeting before then. The first was the …
13th December 2024
Headline inflation back within target The fall in headline consumer price inflation to back within the RBI's target range in November, along with the change of leadership at the central bank into a seemingly less hawkish direction, mean the stars are …
12th December 2024
Overview – After a stellar run, India’s economy has entered a softer patch that will continue for a few more quarters. We think that will portend an underperformance in local equities relative to other major benchmarks. Headline CPI inflation is likely …
10th December 2024
New governor may set a new direction for RBI India’s government has just appointed Revenue Secretary Sanjay Malhotra as the new governor of the Reserve Bank of India (RBI). He will replace the Shaktikanta Das following six years at the helm. The …
9th December 2024
Rupee at record low belies exchange rate stability On the face of it, the recent moves in financial markets pose a dilemma for the Reserve Bank’s MPC, which earlier today voted to keep the repo rate unchanged at 6.50%. (See here for our initial response …
6th December 2024
The Reserve Bank of India’s (RBI’s) decision to keep the repo rate unchanged at 6.50% today highlights its unease at the current rate of headline inflation. Admittedly, the lowering of the cash reserve ratio does show that it is turning more concerned …
Repo rate cuts to begin in April The Reserve Bank of India’s decision to keep the repo rate unchanged at 6.50% today highlights its unease at the current rate of headline inflation. We think inflation has now peaked and indeed, the lowering of the cash …
BJP’s Maharashtra win reduces fiscal slippage risks The convincing win for Prime Minister Modi’s BJP-led alliance in the election in Maharashtra (see Chart 1) is likely to have provided some reassurance to the ruling national party that it maintains …
29th November 2024
Sharp fall in Growth GDP figures show the economy slowed sharply last quarter, and we expect economic activity to struggle over the coming quarters. That bolsters the case for policy loosening, but the recent jump in inflation means the RBI won’t feel …
We held an online session on US import tariffs on 26th November. (See a recording here ). In this Update we answer the questions we were most asked. What are Trump’s motives for threatening tariffs and will he follow through? Trump has spoken about using …
Inflation surge and hawkish comments suggest no rate cut next week We now think easing will begin in April as inflation drops back and economy cools We expect 100bps of cuts this easing cycle, a more dovish view than the consensus The …
27th November 2024
President-elect Donald Trump’s first threatened tariffs since the election are designed to extract concessions on drug trafficking and illegal border crossings, which means it may be possible for the countries targeted – Canada, Mexico and China – to head …
26th November 2024
India’s stock market has had such a good few years that it started to raise concerns about whether it was in a “bubble”. And as it’s come under pressure recently, some have speculated that the bubble is bursting. For our part, we think that there are …
We discussed the global impact of higher tariffs in a Drop-In on Tuesday, 26th November. Click here to watch the 20-minute online briefing. In this Focus, we construct a framework to explore the channels through which an import tariff works, which we use …
25th November 2024
The latest activity data have brought further evidence that India’s economy is going through a soft patch. But given the strength of the recent inflation data, we now expect the RBI to keep rates on hold until April. For India, the direct impact of a 10% …
Air pollution a modest but persistent headwind Even by India’s unenviable standards, there has been a marked deterioration in air quality over recent weeks. Air pollution in New Delhi has been above the government’s “severe” threshold for much of the …
22nd November 2024
Friendshoring into India has for the most part been limited to high-end manufactured goods, but broader supply chain reconfiguration into the country could take place if the Trump administration imposes a 60% tariff on China. Trump has also been critical …
21st November 2024
Powerhouse state takes to the polls The dust is settling on the US election and we’ve been considering the implications for different economies and asset classes; clients can see all of our work on this dedicated webpage . For India Watchers, the action …
15th November 2024
We argued 18 months ago that the sharp rise in unsecured lending left India’s financial sector at risk of rising defaults, and anecdotal evidence suggests that this risk is materialising. The chances of a full-blown banking crisis in India are low, but a …
13th November 2024
