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The narrowing in India’s merchandise trade deficit in September should help to temper some of the concerns that have recently been building over the external position. And looking ahead, we think that the deficit will narrow further over the coming …
16th October 2018
The rise in wholesale price inflation in September was due in large part due to a significant rebound in food inflation. But core inflation also remained elevated, supporting our view that the RBI’s tightening cycle still has a little further to run. … …
15th October 2018
Consumer price inflation crept only a little higher last month. But with core inflation still well above the Reserve Bank’s target, we think that the tightening cycle has a little further to run. … Consumer Prices (Sep.) & Industrial Production …
12th October 2018
The Electoral Commission confirmed this week that five state elections will take place before the end of 2018. As ever, these will have an important bearing on economic policy at the local level, and will also go some way to determining whether the ruling …
GDP growth has surged in recent quarters and, while it has probably peaked, we expect it to remain strong ahead of the general election in the first half of 2019. Thereafter, a focus on fiscal tightening and the lagged impact of recent rates hikes means …
11th October 2018
Remittances from abroad are a vital – yet often underappreciated – source of funding for India at the macro level, and provide significant financial support for millions of families. Remittances may not grow as fast as the wider economy over coming years …
9th October 2018
Consumer price inflation is likely to have risen in September, in large part because the recent sharp fall in food inflation appears to have reversed. More important from the policy perspective, core inflation is likely to have remained elevated. The …
8th October 2018
The Reserve Bank of India (RBI) unexpectedly kept rates on hold today, but flagged several upside risks to the inflation outlook in its accompanying statement and explicitly shifted to a more hawkish formal description of its policy stance. As such, we …
5th October 2018
We think that the recent fall in Indian equities – down by another 4% this week – has further to run. Domestically, concerns over the scale of balance sheet problems in the shadow banking sector will rumble on for a while yet. And even with the recent …
India’s manufacturing PMI rose in September, continuing the recent run of positive economic data. Looking ahead, prospects for local manufacturers remain fairly bright over the near term. … Manufacturing PMI …
1st October 2018
After spending years in the background amid the well-documented struggles of state-owned banks, India’s “shadow” banking sector has been thrust into the spotlight over the past week following news that a local lender will miss several debt repayments this …
28th September 2018
Ever since starting its rate-hiking cycle in June, the RBI made clear that the future path of monetary policy will be determined by incoming data. With GDP growth surging to a two-year high in Q2 and core inflation remaining elevated, there are good …
27th September 2018
The government’s announcement this week that it will merge three state-run banks is another step in the right direction towards fixing the beleaguered banking system, following on from the recapitalisation programme and the strengthened bankruptcy code. …
21st September 2018
There have been some notable shifts in Indian policymakers’ approach to foreign trade over the past month. For a start, the continued slide in the rupee caused the government to announce measures to restrict imports of “non-essential” items. At the same …
20th September 2018
The continued weakness of the rupee has triggered speculation this week that policymakers are about to adopt special measures to shore up the currency. One possibility is the reintroduction of a scheme used during the “Taper Tantrum” to attract foreign …
14th September 2018
The moderation in wholesale price inflation in August was in large part due to another drop in food inflation. But core inflation remained elevated, supporting our view that the RBI’s tightening cycle still has a little further to run. … Wholesale Prices …
Another sharp drop in food inflation pulled down headline consumer price inflation in August. But core inflation remains high and we still think that the Reserve Bank’s tightening cycle has a little further to run. … Consumer Prices (Aug.) & Industrial …
12th September 2018
India’s current account deficit remained at a sustainable level in Q2, confounding the fears that some had expressed of a sharp widening. What’s more, the deficit is now being financed primarily by foreign direct investment, which should remain relatively …
10th September 2018
The latest slide in the rupee appears finally to have jolted the RBI into action, with widespread reports of intervention today. We doubt that this will draw a line under the rupee’s decline. Meanwhile, the reliability of the GDP data is again being …
7th September 2018
Headline consumer price inflation is likely to have eased in August, in large part due to another fall in food inflation. But more important from the policy perspective, core inflation is likely to have remained elevated. The upshot is that the RBI’s …
5th September 2018
India’s manufacturing PMI dropped in August, suggesting that growth in the sector has lost a bit of momentum in Q3 after a very strong Q2. … Manufacturing PMI …
3rd September 2018
Indian GDP growth beat most expectations in Q2 and is likely to continue expanding rapidly over the coming months, supported by looser fiscal policy ahead of next year’s general election. … GDP …
31st August 2018
Fuel prices have risen to record highs in most of India’s major cities in recent weeks. This creates a political headache for the ruling BJP ahead of next year’s general election. However, the price rises won’t have a major impact on inflation or monetary …
The rupee’s slide against the US dollar this year has been met with frenzied commentary in some quarters. But policymakers look comfortable with the weaker rupee. In particular, the RBI appears to have been less aggressive in intervening in FX markets in …
28th August 2018
The rupee has stabilised over the past week or so, but it remains very close to an all-time low against the US dollar. With sentiment towards EMs unlikely to improve dramatically any time soon, we have revised our forecasts. We now think that the rupee …
24th August 2018
The flooding in Kerala is among the worst in recent memory, and has already had a devastating human cost. But from an economic perspective at least, the damage should be manageable. … Economic implications of the Kerala …
23rd August 2018
Indian equities have continued to surge in August, with the benchmark Sensex stock index rising to a fresh record high of over 38,000 today. The recent strong performance in the Sensex compared to other equity markets is perhaps a reflection of the fact …
20th August 2018
Prime Minister Modi confirmed this week that his nationwide healthcare insurance scheme will be rolled out in September. Better healthcare provision could bring several benefits, from both an economic and wider perspective. But the government is …
17th August 2018
The minutes of the Reserve Bank’s August policy meeting – at which interest rates were hiked again – show that the MPC has placed great importance on preserving its recently-acquired credibility. With this in mind and given that core inflation is still …
The further widening in India’s merchandise trade deficit last month is likely to heighten concerns over the external position, particularly amid the broader deterioration in market sentiment towards EMs. But there are still reasons to think that the …
15th August 2018
Wholesale price inflation moderated in July after hitting a five-year high in June. But core inflation remained elevated, supporting our view that the RBI’s tightening cycle still has a little further to run. … Wholesale Prices …
14th August 2018
The drop in Indian consumer price inflation in July was due in most part to a sharp fall in food inflation. Core inflation remained elevated. As such, we think that the Reserve Bank’s tightening cycle has a little further to run. … Consumer Prices …
13th August 2018
Indian industrial production growth jumped in June, and prospects for the sector remain relatively upbeat over the near term. That said, the recent hikes to tariffs on textiles imports could end up doing more harm than good to local industry. … Industrial …
10th August 2018
Recent hikes to import duties on various textiles products appear to be an attempt by Prime Minister Modi and the BJP to shore up popular support ahead of the general election in early 2019. But while the moves may help some local manufacturers, they are …
Headline consumer price inflation is likely to have dropped in July, in large part due to a fall in food inflation. But core inflation is likely to have remained elevated by the standards of the recent past, underlining why the Reserve Bank felt it needed …
8th August 2018
Only one-quarter of Indian women of working age are in paid employment. If participation in the workforce could increase to the rates of other Asian countries such as Indonesia or the Philippines by 2025, the economy could be 15% larger than otherwise. …
7th August 2018
Data released this week show a rapid expansion of the central government’s deficit in the early part of this fiscal year. This is a common occurrence, as revenues tend to get ramped up in the latter months. Even so, there are a number of reasons to think …
3rd August 2018
The RBI opted to tighten policy again today against a backdrop of strong growth and rising inflation. The swiftness with which the central bank has responded to the jump in inflation should prevent the need for very aggressive policy changes in the …
1st August 2018
India’s manufacturing PMI dropped in July, following the trend across most of Asia. Nevertheless, the reading remains decent, and prospects for local manufacturers remain bright over the near term. … Manufacturing PMI …
The BJP-led government this week ruled out the possibility of issuing a blanket loan waiver for farmers ahead of next year’s general election. But this is something of a red herring. After all, waivers have already been announced in numerous states that …
27th July 2018
When hiking interest rates at its most recent meeting in June, the RBI made clear that the future path of monetary policy will be determined in large part by incoming data. With several indicators showing that activity remained strong in Q2 and core …
26th July 2018
Prime Minister Modi’s BJP comfortably defeated the vote of no-confidence initiated by opposition parties on Friday. The result isn’t a major surprise given that the BJP holds a majority in the Lok Sabha (lower house of parliament). In fact, the overall …
23rd July 2018
The BJP-led government faces a no-confidence vote triggered by opposition parties over the coming days. We highly doubt the motion will lead to the fall of the government, given that the BJP holds a majority in the lower house of parliament. But the …
20th July 2018
Policymakers don’t put much weight on the wholesale price measure of inflation, but the fact that it surged to its highest rate in almost five years in June and looks set to remain elevated suggests that the RBI will follow up its recent rate hike with …
16th July 2018
The further widening in India’s trade deficit last month, coupled with the growing protectionist threat from the US, will inevitably raise concerns. But unlike many other countries in Asia, India’s exposure – both direct and indirect – to a more …
While many other major EM equity markets have dropped recently amid rising fears of a global trade war, Indian equities have surged, with the Sensex reaching an all-time high this week. But while India isn’t as exposed to current global headwinds as many …
13th July 2018
Consumer price inflation rose to a five-month high in June and, with core inflation in particular set to remain elevated, we think the RBI will follow up last month’s hike in the repo rate with further modest policy tightening, perhaps even as soon as the …
12th July 2018
In principle, Prime Minister Modi’s plan to introduce a health insurance scheme could bring numerous benefits, including from a narrow economic perspective. But the government is allocating very little funding to the scheme and is not addressing …
11th July 2018
Confirmation this week that the government will implement large increases in the minimum support price (MSP) of key monsoon crops supports our view that rural incomes will strengthen significantly this year. This should underpin a pick-up in private …
6th July 2018
Economic growth has surged in recent quarters and we expect it to remain strong over the next year or so, supported by buoyant private and government consumption ahead of the general election that is due in mid-2019. Core inflation is also set to stay …
5th July 2018
