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India’s monthly goods trade deficit widened in April but, given its very low exposure to a ratcheting up of trade tensions between the US and China and the fact that oil prices are likely to fall, we think the deficit will remain contained over the coming …
16th May 2019
The drop in wholesale price inflation in April will increase the clamour for another rate cut in June. But we think that underlying inflation will soon rise again, which underlines the risks associated with further monetary loosening. … Wholesale Prices …
14th May 2019
Further interest rate cuts in India look only a matter of time after headline inflation in April came in at a below-target 2.9% y/y. However, we continue to think that further monetary loosening is a policy mistake, as we expect underlying inflation to …
13th May 2019
Recent revelations have once again cast a spotlight on the accuracy of Indian data, but unfortunately, we doubt that the formation of an independent regulator, that some have called for, would lead to any great improvement. Meanwhile, we think that the …
10th May 2019
Headline consumer price inflation is likely to have risen in April due to another pick up in food inflation. However, it will have remained below the RBI’s 4.0% target. That will be enough to prompt the central bank to cut policy rates again, perhaps as …
7th May 2019
The surge in GST revenues over recent months won’t be enough to solve the government’s fiscal woes in the near term. However, it does suggest that compliance with the new tax system is improving, and a continued rise in revenues would boost prospects for …
3rd May 2019
India’s manufacturing PMI dropped again in April, but this is not a huge cause for concern. After all, the reading is still consistent with decent manufacturing output growth and we think that the prospects for local manufacturers remain fairly bright …
2nd May 2019
The extent of the monsoon rains has a significant impact on the livelihoods of millions of families in India given the high level of employment in agriculture. But at the macro level, the monsoon matters less to economic growth and inflation these days …
30th April 2019
High global oil prices have in the past contributed to worryingly-large current account deficits in India but prices would have to rise much higher than they have recently for that to return as a risk. Domestically, we doubt the government would cut …
26th April 2019
India’s mammoth general election that began earlier this month is now past the halfway stage. Votes have been cast in 302 out of the country’s 543 constituencies, with four days earmarked for further voting to take place before results are announced on …
24th April 2019
Remittances from abroad are an important source of external funding for India and were equivalent to almost 3% of GDP in 2018. That was more than FDI and portfolio inflows combined. Although there are some risks, we think that remittance inflows will …
23rd April 2019
Indian goods exports grew strongly in March, bucking the trend across most of Asia. But this strength is unlikely to last given a weakening of global demand and domestic capacity constraints. … Export strength unlikely to …
18th April 2019
India’s monthly goods trade deficit widened a touch in March but, with oil prices likely to fall, we think the deficit will remain contained over the coming months. In turn, that should help to keep the current account deficit at sustainable levels. … …
16th April 2019
Growth in India is likely to slow as policy tightens after the general election. Even so, it should still be the best performing major emerging economy in the coming years. … Slower growth after the …
15th April 2019
The rebound in March’s wholesale price inflation is unlikely to prevent the RBI from cutting rates at its next policy meeting in June. But with underlying inflation set to rise further, there is reason to question the dovish stance adopted by the central …
March’s rise in inflation probably won’t dissuade the RBI from cutting interest rates again at the next policy meeting. But with core inflation still elevated, the latest data underline the risks from the more dovish stance that the RBI has adopted under …
12th April 2019
The World Bank released its latest growth forecasts for India this week and, while we wouldn’t get too hung up on small differences in the numbers, the trajectory of growth that the Bank is forecasting seems too optimistic to us. The Bank also reported …
Headline CPI inflation will have remained low in March, even if, as we suspect, it rose slightly as food inflation continues to pick up. The RBI will almost certainly follow up its cumulative 50bp of rate cuts this year with further loosening, perhaps as …
8th April 2019
Indian equities scaled new highs this week, with the Sensex surpassing 39,000 for the first time on Tuesday. But we doubt that the recent rally will be sustained. From a valuations perspective, Indian equities are now looking extremely stretched. More …
5th April 2019
The RBI has delivered another pre-election gift to the government by lowering rates at a second successive meeting. A low level of headline inflation provided justification for the move. But with core inflation high, and a growing perception that the …
4th April 2019
The BJP appears on course to remain in power after India’s general election. But which party wins probably matters less for the economy and financial markets than whether the election delivers a stable government. A durable coalition or, less likely, …
2nd April 2019
India’s manufacturing PMI dropped in March, but this shouldn’t raise any alarms. After all, the reading hit a 14-month high in February and overall, the recent PMIs suggest that the manufacturing sector performed well in Q1. Looking ahead, prospects for …
India’s current account deficit widened at the end of 2018 but this shouldn’t reignite concerns over the external position. With oil prices likely to fall, the deficit will remain at a comfortable level over the coming quarters. … Current account deficit …
1st April 2019
Reports that Congress has been rebuffed in its attempts to form an alliance with local parties in Uttar Pradesh would, if accurate, provide a major boost to Prime Minister Modi’s BJP ahead of next month’s general election. Meanwhile, the finance ministry …
29th March 2019
The MPC is likely to use the recent confirmation that GDP growth slowed in Q4 and the current low rate of headline inflation as justification for another interest rate cut at the conclusion of its policy meeting on Thursday 4th April. But with core …
27th March 2019
The extremely low share of women in India’s formal workforce has become a talking point in the election campaign. It has far-reaching ramifications, including by keeping the economy much smaller than it would otherwise be. Unfortunately, the policy …
22nd March 2019
The 3% rise in the rupee against the US dollar so far in March has left it at its strongest rate since August, and means it has outperformed all other major EM currencies this month. This is related in part to recent opinion polls showing that the ruling …
20th March 2019
India’s monthly goods trade deficit narrowed to a 17-month low in February and, with oil prices set to remain low, we think the shortfall will remain small over the coming months. In turn, that should help to keep the current account deficit at …
18th March 2019
India’s economic diversity and the decentralisation of policymaking power mean that investors should keep an eye on developments at the state as well as the national level to understand trends in the economy. To this point, while a report from the RBI …
15th March 2019
The slight rebound in February’s wholesale price inflation is unlikely to prevent the RBI from cutting rates again next month. However, there is good reason to think that underlying inflation will rise over the coming months, which would raise concerns …
14th March 2019
February’s rise in inflation probably won’t dissuade the RBI from cutting policy rates again next month. But the latest data underline the risks from the more dovish stance that the RBI has adopted under Governor Das, with core inflation still worryingly …
12th March 2019
The decision by the US to scrap the preferential trade status granted to several Indian products has grabbed headlines this week. But the direct impact of the measures will be small. India’s exports to the US last year were worth just 2% of GDP. …
8th March 2019
Headline CPI inflation will have remained low in February even if, as we suspect, it rose a touch due to higher food inflation. As such, the RBI will almost certainly cut policy rates again, perhaps as soon as at its next meeting in April. But with core …
6th March 2019
Recent moves to tighten restrictions on foreign e-commerce firms are more a reflection of the government wanting to boost popular support ahead of the general election than a fundamental shift in attitudes towards FDI. If the Modi government wins the …
4th March 2019
India’s manufacturing PMI surged to a 14-month high in February and once again bucked the trend across most of Asia. Looking ahead, prospects for local manufacturers remain bright over the near term. … Manufacturing PMI …
1st March 2019
Developments in Kashmir this week have left tensions between the Indian and Pakistani government at their most fraught in years, but the economic and market impact of the crisis is likely to be small. … Limited economic and market fallout from …
Indian GDP data show that although the economy slowed in the final quarter of last year, it is still continuing to grow at a decent pace. The economy should perform relatively well in the first half of 2019, supported by looser fiscal policy ahead of the …
28th February 2019
The fall in Pakistan’s stock market today is the first sign that investors are starting to become concerned about the escalating crisis in Kashmir. The most likely outcome is that tensions are dialled back over the coming days, but even a period of …
27th February 2019
There is little evidence to suggest that inflation in the services sector is being boosted by “one-off” factors, as has been suggested by several MPC members. Instead, it appears to be a reflection of strong domestic demand, adding to evidence elsewhere …
26th February 2019
The minutes of the Reserve Bank’s 7 th February policy meeting – in which rates were cut – reveal a significant difference of opinion between MPC members on the outlook for core inflation. We share the view of the committee’s two dissenters that elevated …
22nd February 2019
Measures to loosen both fiscal and monetary policy announced this month could provide a small boost to demand in the near-term. The finance ministry made a clear bid in the interim budget to shore up support ahead of the general election with plans to …
20th February 2019
India’s merchandise trade deficit widened in January, but with oil prices likely to fall over the coming months, we think the shortfall will narrow again before long. In turn, that should help to keep the current account deficit at sustainable levels. … …
18th February 2019
Recent developments have again cast a spotlight on the accuracy of Indian data, but unfortunately, we doubt that the formation of an independent regulator, that some have called for, would lead to any great improvement. Meanwhile, we think that the drop …
15th February 2019
The drop in headline wholesale price inflation in January was broad based, but underlying inflation is likely to rise again before long. This underlines why we think the RBI’s recent rate cut, as well as others that look set to follow, will prove to be a …
14th February 2019
Headline consumer price inflation was low and virtually unchanged in January but, more importantly, core inflation remained elevated. The RBI suggested last week that the core rate has been boosted by temporary factors but there is little support for that …
12th February 2019
The RBI was able to point to a fall in inflation to justify its rate cut this week. But it also took a more sanguine line on the risks posed by still-high core inflation. We believe this will prove to have been a mistake. … RBI changes …
8th February 2019
The RBI’s new governor Shaktikanta Das has delivered what the Modi government was hoping for. The “calibrated tightening” stance was jettisoned at his first policy meeting today in favour of a rate cut. A low level of headline inflation provided …
7th February 2019
The finance ministry made a clear bid in the interim budget today to shore up popular support ahead of the general election with proposals to boost rural incomes and cut income tax. But it is also hoping to demonstrate its commitment to fiscal prudence by …
1st February 2019
India’s manufacturing PMI jumped in January, defying the trend across most of Asia. Looking ahead, prospects for local manufacturers remain fairly bright over the near term. … Manufacturing PMI …
The idea of a Universal Basic Income (UBI) in India has gained attention again this week. While a UBI could go a long way towards eradicating poverty and reducing the problems with the current welfare system, its high fiscal cost and a lack of necessary …
