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The rise in Indian consumer price inflation in November doesn’t put the RBI’s inflation target for January 2016 under threat, but it does highlight that the central bank cannot be certain of meeting its more challenging medium-term targets. This bolsters …
14th December 2015
Wholesale price inflation picked up in November and, looking ahead, we think that it will rise further over the coming months and return to positive territory by Q1 2016. … Wholesale Prices …
India’s industrial sector performed well in October and favourable cyclical factors should help to sustain healthier growth in coming months. But structural headwinds are likely to hold back local industry over the longer term. … Industrial Production …
11th December 2015
Inflation is likely to have accelerated in November, as last year’s slump in global oil prices begins to drop out of the annual comparison. Looking ahead, the Pay Commission’s recommendation for a large rise in public sector wages is likely to add to the …
8th December 2015
The RBI is expressing a high degree of faith in the finance ministry’s ability to offset a rising public sector wage bill by boosting tax revenues or trimming other forms of current spending. We fear this faith is misplaced and that public investment will …
7th December 2015
The Reserve Bank of India (RBI) kept its repo rate on hold at 6.75% today and, rather than just being on pause, we maintain our view that the loosening cycle is now at an end. … RBI holds rates, loosening cycle now at an …
1st December 2015
The fall in India’s manufacturing PMI reading in November highlights that, despite recent signs of a recovery in the hard activity data, local industry continues to face significant headwinds. … Manufacturing PMI …
GDP figures for Q3 suggest that India was the world's fastest-growing major economy last quarter. But the official data remain inconsistent with numerous other indicators which suggest the economy is undergoing a bumpy recovery after years of weak growth. …
30th November 2015
Plans to overhaul India’s archaic bankruptcy laws, due to be discussed in the upcoming winter session of parliament, would be a major step towards creating a more favourable business climate and easing constraints in the banking sector. What’s more, in …
27th November 2015
The Reserve Bank of India has cut policy rates by 125bp so far this year, but there are a number of reasons to think that it will keep the repo rate on hold not just at next week’s policy meeting but throughout 2016. In particular, the RBI faces a tough …
25th November 2015
Prime Minister Modi has spent much of November on official visits to the UK and Singapore, but a number of domestic issues have made this a month that he will want to forget. … State elections, strikes, and civil servant …
23rd November 2015
The Indian rupee has weakened against the US dollar over the past month and, looking ahead, the currency could drift a little lower as the US Fed begins to tighten policy. But given the big improvement in India’s current account position over the past …
19th November 2015
India’s consumer market is often the subject of frenzied interest among investors and commentators but, in recent years, growth has been held back by both cyclical and structural headwinds. In this Focus , we assess the prospects for a revival in Indian …
18th November 2015
India’s trade deficit narrowed in October and, looking ahead, there are reasons to think that the import bill will remain in check. Given this, the overall current account position looks unlikely to return as a source of vulnerability any time soon. … …
17th November 2015
Wholesale price inflation picked up in October and, looking ahead, we think that it will rise further over the coming months as the base effects that have helped to keep down food and fuel inflation continue to fade. … Wholesale Prices …
16th November 2015
The increase in India’s consumer price inflation in October doesn’t put the RBI’s inflation target for January 2016 under threat, but it underlines that policymakers cannot be certain that they will meet the more stretching target for early 2017. Given …
12th November 2015
Measures announced yesterday to further ease restrictions on foreign direct investment into India should help to build on one of the main policy successes of the Modi government so far. However, wider-ranging reform is still needed to provide a more …
11th November 2015
The heavy defeat for Prime Minister Modi and the BJP in the Bihar state assembly election suggests that political goodwill towards the winners of last year’s general election is beginning to run out, and also dampens prospects for economic reform at the …
9th November 2015
Inflation is likely to have risen in October, as the favourable base effects that helped to anchor food inflation in recent months continue to fade. With inflation expectations also edging up, there is little scope for further policy easing. … Inflation …
6th November 2015
Comments this week from RBI Governor Raghuram Rajan and Finance Minister Arun Jaitley hint at a welcome thawing in their frosty relationship. What’s more, they support our view that the rate-cutting cycle is now at an end. … Is monetary policy “just …
4th November 2015
The fall in India’s manufacturing PMI reading in October highlights that, despite recent signs of a recovery in the hard activity data, local industry continues to face significant headwinds. … Manufacturing PMI …
2nd November 2015
With more than half of the fiscal year having elapsed, the government’s aim of raising nearly INR700bn in revenues through the privatisation of various state-owned companies looks increasingly unrealistic. In response, rather than allowing the budget …
30th October 2015
The ongoing India-Africa Forum Summit in Delhi has been accompanied by a great deal of confused commentary on the nature and extent of economic relations between India and Africa. Contrary to what many seem to believe, the overwhelming majority of India’s …
28th October 2015
India’s two new schemes aimed at reducing gold imports, due to be rolled out next month, are likely to have mixed results. The Sovereign Gold Bond Scheme’s easy accessibility and more transparent returns make it more likely to succeed than the Gold …
27th October 2015
Despite the tailwinds of low inflation and reductions in interest rates over the past few months, consumer spending in India remains subdued. This is due in large part to continued problems in the labour market and the domestic banking system. With …
22nd October 2015
Prime Minister Modi and the BJP face an uphill battle in their attempts to win the ongoing election in the state of Bihar. From an economic perspective, the Bihar vote is important for two key reasons. First, Bihar is one of India’s most populous, and …
21st October 2015
After struggling for most of this year, Indian equities have rallied so far in October. Looking ahead, with valuations not looking particularly stretched, we expect equities to post further gains over the next couple of years. … Equities regain their …
20th October 2015
The narrowing in India’s trade deficit in September masks that fact that exports continue to contract sharply. Wide-ranging reform is needed to boost export prospects but, with progress still slow, the government’s ambitions to nearly double export values …
16th October 2015
A bailout for India’s heavily-indebted electricity providers would be a positive step, but there are reasons to doubt the effectiveness of any rescue deal. For a start, any package is likely to be small given the Finance Ministry’s commitment to fiscal …
15th October 2015
Wholesale price inflation rose in September after falling a record low in August. Looking ahead, we think that WPI inflation will accelerate further over the coming months as the favourable base effects that have helped to keep down food and fuel …
14th October 2015
Having cut the repo rate by 125bp this year, the RBI has shifted its focus to ensuring that banks pass on these rate reductions to borrowers. In truth, high levels of bad debt mean that the banking system needs large-scale capital injections and arguably …
13th October 2015
Indian consumer price inflation rose in September. Looking ahead, while theRBI’s inflation target for January 2016 isn’t under threat, meeting the medium term target will be difficult. Given this, we think that the window forfurther interest rate cuts has …
12th October 2015
Inflation is likely to have accelerated in September, due in large part to the unwindingof the favourable base effects that helped anchor food inflation in July and August.What’s more, inflation expectations have picked up amid concerns over a …
7th October 2015
The fall in India’s manufacturing PMI reading in September highlights the fact that, despite recent signs of a recovery in activity, local industry continues to face significant headwinds. … Manufacturing PMI …
1st October 2015
The Finance Ministry’s combative approach to some key issues, including the retrospective taxation of foreign companies and the potential composition of the proposed monetary policy committee, has raised concerns over the past few months. But an apparent …
30th September 2015
The Reserve Bank of India’s (RBI’s) decision to cut the repo rate by 50bp today, to 6.75%, went beyond what most had expected. But having stated that its attention will now turn to its medium-term inflation target, we think that there is little scope for …
29th September 2015
With recent activity data weak and inflation low, the consensus has swung around to our long-held view that the Reserve Bank of India will cut interest rates again this year, with the upcoming meeting on 29th September now looking the most likely venue. …
24th September 2015
India’s Finance Ministry continues to tread on dangerous ground by becoming increasingly vocal in its calls for further monetary easing. Most recently in an interview over the weekend, Finance Minister Arun Jaitley stated that “common sense says that …
22nd September 2015
The weakness of inflation over the past couple of months, combined with the inaction of the US Fed, has prompted India’s financial markets to raise expectations of another cut in interest rates next week. Most notably, local two-year bond yields have …
21st September 2015
Measures taken by the government to encourage foreign direct investment into India are showing signs of success. Net FDI inflows rose last quarter to their highest level as a share of GDP since Q4 2009. Wider-ranging reform would provide a further boost …
17th September 2015
India’s increasingly decentralised system means that state elections such as the upcoming vote in Bihar have a bearing on economic policy. Perhaps more significant, the need to campaign at the local level can make a national ruling party reluctant to …
16th September 2015
The weakness of consumer price inflation in August should be the clinching factor in determining whether or not the Reserve Bank cuts interest rates at its meeting later this month. … Consumer Prices …
14th September 2015
The rise in India’s current account deficit in Q2 was due in large part to seasonal patterns. The important point from a wider perspective is that the deficit remains small. This, combined with the fact that FDI inflows have picked up, means that there is …
Wholesale price inflation dropped sharply in August to its lowest rate since the series began. The WPI rate may not have as much of a bearing on policymaking as the CPI rate, but the fact that it has plummeted again is unlikely to be ignored. This …
India’s industrial production outperformed most expectations in July but there remainsignificant headwinds to a sustained recovery. … Industrial Production …
11th September 2015
The long-awaited implementation of the Goods and Services Tax (GST) in India could bring significant benefits to the economy. But a decade after it was first proposed, there are still a number of sticking points preventing its introduction. In truth, not …
9th September 2015
Inflation is likely to have edged down in August, due in large part to favourable base effects caused by the spike in food prices a year ago. But these effects are soon likely to fade, which will push up headline inflation over the coming months. And with …
8th September 2015
The rapid expansion of the government deficit in the early part of this fiscal year has led to some concerns about the Finance Ministry’s ability to meet its budgeted target. These concerns are probably overdone but, in any case, a slightly looser fiscal …
4th September 2015
The raft of comments and media reports arguing that India is set to become the new engine of global growth following the recent struggles in China were given more fuel earlier this week with the release of GDP data showing that India grew as fast as China …
3rd September 2015
India’s manufacturing PMI edged down in August, highlighting that conditions are still subdued by past standards. Looking ahead, with progress on creating a favourable business environment remaining slow, a sustained pick-up in manufacturing output seems …
1st September 2015
