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Inflation is likely to have remained subdued by past standards in April, with a small pick-up in transport inflation being offset by muted food and core price pressures. The big picture is that the Reserve Bank looks on course to meet its inflation target …
7th May 2015
India’s manufacturing PMI dropped in April, underpinning the difficulties facing the sector. Looking ahead, with progress on creating a favourable business environment remaining slow, a boom in manufacturing output seems unlikely. … Manufacturing PMI …
4th May 2015
The rupee was one of the worst performing EM currencies against the US dollar in April, but we doubt that this will cause panic among India’s policymakers. Over a longer time horizon the rupee remains a relative outperformer, and given its appreciation in …
30th April 2015
The government’s plans to boost capital expenditure, along with looser monetary policy, should help to support the recent pick-up in investment activity over the coming months. But continued constraints on the reform front mean that a spectacular rebound …
Forecasts for a weaker-than-normal monsoon in India this year have raised concerns about the effect on the wider economy. Although lower rainfall could affect GDP growth and inflation at the margin, there are a number of factors that should mitigate the …
28th April 2015
Some of the latest data out of India have given reason for cheer, but there is plenty of evidence of continued cyclical weakness. For example, capacity utilisation rates are low, growth in sales of consumer goods has slowed so far this year, and bank …
24th April 2015
After touching record highs in early March, Indian equities have fallen back in recent weeks. Looking ahead, with valuations still looking stretched and uncertainty over the government’s tax policy unnerving investors, a spectacular rebound in the equity …
22nd April 2015
The surge in gold imports last month is likely to have been boosted by temporary factors, including an unleashing of pent-up demand by buyers that had been expecting tax cuts (which didn’t materialise) and greater consumer demand ahead of religious …
21st April 2015
Data released today show that India’s trade deficit widened in March, but remained at sustainable levels. The more worrying aspect is the collapse in exports, which leaves the government’s longer term targets looking increasingly unrealistic. … Trade …
17th April 2015
Comments from Finance Minister Arun Jaitley that he plans to raise nearly US$6.5bn by retrospectively taxing foreign companies would, if acted upon, represent a major relapse on economic reforms, and could dampen investment into India. A more effective …
16th April 2015
Among the more headline-grabbing developments in the IMF’s latest World Economic Outlook is that the Fund is now forecasting India’s economy to grow faster than China’s in 2015 and 2016. But putting aside the accuracy of the revised GDP data for India …
15th April 2015
Wholesale price inflation fell further into negative territory in March to its lowest rate since the series began in 2005. Crucially, core inflation continues to drop sharply, providing more evidence of economic slack. … Wholesale Prices …
Consumer price inflation unexpectedly dropped in March as concerns over the impact of heavy rains on food inflation proved unfounded. What’s more, core inflation remains low, and headline inflation is now comfortably below the Reserve Bank’s near-term …
13th April 2015
The government’s ambitious plans to almost double exports by 2020 from current levels are no bad thing, but in truth the targets look unrealistic. Reforms that would significantly boost export prospects, such as loosening labour laws and easing land …
10th April 2015
Inflation is likely to have accelerated in March, in large part due to rising food prices caused by recent unseasonable rains. But weekly data suggest that the majority of the inflation spike may have passed, while the government could use its large stock …
9th April 2015
Governor Rajan opted not to follow up on March’s rate cut in today’s policy review, with the repo and the reverse repo rates kept on hold at 7.50% and 6.50% respectively. But further rate cuts are still likely, perhaps even at another unscheduled meeting …
8th April 2015
The first rate hike in the US is edging closer, but India’s dramatically improved external position and the fact that the rupee has strengthened in recent months suggest that the Reserve Bank of India (RBI) is under little pressure to follow in the …
3rd April 2015
India’s manufacturing PMI edged up in March, but the bigger picture is that conditions are still subdued by past standards. Looking ahead, with progress on creating a favourable business environment remaining slow, the sector looks set to struggle for …
Recent cuts to policy interest rates should eventually help to boost bank lending in India, the weakness of which has been a significant cause of the economic slowdown over the past few years. But while lower interest rates on loans will help, concerns …
1st April 2015
It has been nearly a year since Prime Minister Narendra Modi and the BJP swept to victory in India's general election amid promises of wide-ranging reform to revamp the struggling economy. In this Focus , we assess how the reform agenda has been …
27th March 2015
The past month has shown that India's authorities are still leaning towards policy loosening to support a cyclical rebound in economic growth, despite the strength of the revised GDP data. For a start, although the Finance Ministry is still aiming to rein …
24th March 2015
The Indian rupee has taken Wednesday’s FOMC meeting in its stride, with the currency dropping only fractionally against the US dollar since then. Looking ahead, the economy is in much better shape to weather tighter US monetary policy than it was two …
20th March 2015
Concerns about destabilising capital flows to emerging markets such as India have again come to the fore, but one factor that often gets overlooked is the role of overseas remittances. Remittance flows into India were twice as large as portfolio flows in …
18th March 2015
Wholesale price inflation dropped further into negative territory in February to its lowest rate since the series began in 2005. This was in part due to falling oil prices, but low core inflation provides more evidence of economic slack. … Wholesale …
16th March 2015
Consumer price inflation picked up in February, having already increased sharply since late 2014. But the rebound has been driven entirely by food prices. Core inflation remains low and flat. The Reserve Bank will not shift its policy stance as a result. …
12th March 2015
India’s current account deficit narrowed in Q4 and remains far smaller than in 2013 when the rupee plunged to record lows against the US dollar. With this improvement set to be maintained, there is little risk of a repeat of the currency crisis. … …
10th March 2015
The recent revisions to historic GDP data have been the source of much confusion, not least within the Reserve Bank of India (RBI). In this Update , we look at four indicators that the RBI appears to be putting more weight on than the revised GDP series …
Forthcoming consumer price inflation data for February should show that the Reserve Bank of India (RBI) remains on course to meet its target for the start of 2016, which has now been formalised under the new monetary policy framework. But further ahead, …
9th March 2015
The Reserve Bank of India’s decision to cut its policy rates today was unscheduled but not entirely a surprise: we had argued that there was a significant chance of an inter-meeting cut following the budget last weekend. With Governor Rajan voicing doubts …
4th March 2015
The Finance Ministry’s plans outlined in the Budget to significantly ramp up capital expenditure are to be welcomed, but fully implementing them will be a tough challenge. Potential impediments include another shortfall in tax revenues, and a lack of …
Although the new monetary policy framework agreed upon by the Reserve Bank of India (RBI) and the government is a positive step, it is also largely symbolic. The framework is unlikely to have much impact on policymaking, given that the new inflation …
3rd March 2015
The FY15/16 budget unveiled over the weekend contained no fireworks but included measured steps to boost public investment while also ensuring fiscal prudence. The key now is for the budget to be fully implemented, and also for it to be supplemented with …
2nd March 2015
Amid the wider interest in what will be unveiled in the FY15/16 budget on Saturday, prospects for the rest of the current session of parliament have slipped under the radar. A number of issues that can have an impact on economic growth are up for debate, …
27th February 2015
Investors are likely to focus on plans for fiscal consolidation when the FY15/16 budget is unveiled on Saturday, but progress on economic reform also warrants close attention. The crucial things to look for are cuts to the subsidy bill, greater capital …
25th February 2015
Eighteen months ago the rupee plunged to a record low against the US dollar as concerns over India’s external vulnerabilities made it one of the hardest-hit economies during the “taper tantrum”. Since then, the balance of payments position has radically …
24th February 2015
India’s revised GDP data paint a far healthier picture of the economy over the past couple of years than had previously appeared the case. GDP growth for FY13/14 was revised up from 4.7% to 6.9%. In addition, the Statistics Office estimates that the …
19th February 2015
The rupee has been the best performing major EM currency so far this year. This is in part due to falling commodity prices which have helped to lower India’s import bill, but it is also the result of strong foreign inflows into local equity markets. … …
18th February 2015
Wholesale price inflation dropped into negative territory in January to its lowest rate since June 2009. In particular, the sharp fall in core inflation adds to evidence elsewhere of increasing economic slack, and bolsters the case for the RBI to cut …
16th February 2015
India’s trade deficit narrowed in January as the sharp fall in global oil prices continued to feed through to the import bill. The smaller deficit provides the central bank with further scope to loosen policy again over the coming months. … Trade …
13th February 2015
Unlike the recently revised GDP data, the rebasing of India’s consumer price data appears to have done little to alter the headline numbers. The big picture is that inflation is still comfortably below the RBI’s near-term goals. Meanwhile, though we …
12th February 2015
Forthcoming consumer price inflation data for January will be the first in the rebased series but, unlike the recently revised GDP data, we doubt that this will have a spectacular impact on headline numbers. The big picture is that inflation looks set to …
10th February 2015
At face value, today’s GDP data for Q4 suggest that India’s economy slowed at the end of 2014, but that it is still growing faster than China’s. However, the GDP calculations under the new methodology remain wildly inconsistent with numerous other …
9th February 2015
Recent moves from the Reserve Bank of India (RBI) to encourage more lending have brought the health of the domestic banking sector under scrutiny. But while the level of bad loans in the system have been rising, there are a number of reasons to think …
6th February 2015
Governor Rajan opted not to follow up on January’s unscheduled rate cut with further loosening in today’s policy review, with the repo and the reverse repo rates kept on hold at 7.75% and 6.75% respectively. But further rate cuts are still likely, perhaps …
3rd February 2015
Revisions to India’s historic GDP data have been greeted with both cheers and bemusement. One of the more puzzling aspects is that nominal GDP in the last fiscal year was left all but unchanged by the revisions, despite faster growth. Meanwhile, the …
2nd February 2015
At face value, today’s revisions to India’s historic GDP data suggest that the economy has been performing far better than had previously appeared. If true, this implies there is much less room for a substantial pick-up in growth without stoking …
30th January 2015
The government’s next budget, due to beannounced on 28th February, has taken on even more importance than normal, with the ReserveBank of India (RBI) looking for fiscal consolidation and investors hoping for details on wider reform. In this Watch, we …
The rupee has been among the world’s best performing currencies so far this year, due to a combination of a narrowing trade deficit and strong foreign inflows into local equities. This has given the RBI even more scope to loosen policy further, perhaps as …
29th January 2015
Following the RBI’s decision to cut interest rates at an unscheduled meeting earlier this month, a small majority of forecasters expect rates to be kept on hold at the scheduled policy meeting next week (Tuesday). But there are good reasons to expect …
27th January 2015
The Reserve Bank of India (RBI) shocked markets earlier this month by cutting its main policy rates at an unscheduled meeting. The accompanying statement also paved the way for further policy loosening. Indeed, with the latest data showing that both …
22nd January 2015
