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Heatwave damage could extend beyond wheat The news has been dominated this week by the government’s decision to restrict exports of wheat on food security grounds, following heavy damage to crops from the heatwave. This has caused ructions in the global …
20th May 2022
Rise in bond yields becoming a concern The rupee dropped to an all-time low against the US dollar this week but, as we noted here , the big picture is that it has held up much better than most other EM currencies over the past few months. One reason is …
13th May 2022
Power shortages pose upside risk to inflation The ongoing heatwave in India is prompting a surge in electricity demand that power companies are struggling to meet. (See Chart 1.) In fact, power shortages at peak times were more widespread in April than in …
6th May 2022
Repo rate hike on the horizon MPC members have been in a chatty mood this week, with both Jayanth Varma and Ashima Goyal giving interviews to the press. Despite being at opposite ends of the policy spectrum (Mr Varma is the most hawkish member of the …
29th April 2022
UK trade deal would have limited impact UK Prime Minister Boris Johnson’s two-day visit to India – which concludes today – has garnered plenty of headlines. Underpinning the visit are talks between PM Johnson and counterpart PM Narendra Modi towards a …
22nd April 2022
Upside risks to inflation are materialising We’ve been arguing for several months that both the consensus and the RBI have been underestimating the upside threats to inflation. Consumer price data for March released this week have reinforced our view. The …
14th April 2022
Pressure mounting on India-Russia relations Relations between India and Russia came under fresh scrutiny this week, with US officials warning of “significant and long-term” consequences if India moves towards a “more explicit strategic alignment” with …
8th April 2022
Dovish RBI will need to tighten before long Watchers of India’s economy will be focussed on the RBI’s policy announcement at the conclusion of the MPC meeting on Friday 8 th April. Clients can read a full preview of the announcement in our RBI Watch …
1st April 2022
Rupee-ruble exchange would still lift oil import bill Indian authorities are in advanced discussions with their Russian counterparts over a rupee-ruble exchange system that would enable the two countries to continue trading even as Russia gets blocked …
25th March 2022
Wheat exports impact will be limited The disruption to the global wheat market caused by the war in Ukraine presents an opportunity to Indian exporters. India is the world’s second largest producer of wheat, but until recently virtually all of that …
18th March 2022
Hit to GDP will come via net trade and investment We continue to write extensively across our services about the financial and economic implications of the war in Ukraine. All of our research on the topic can be found here . As a major net oil importer, …
11th March 2022
Supply disruptions easing, but risks are high There are signs that supply disruptions in India have eased a touch. The PMIs for February released this week show that the backlog of works components have stabilised after rising sharply since the middle of …
4th March 2022
Clients can find Capital Economics’ detailed coverage of the Russia-Ukraine crisis, including research on the potential impact on the global economy, energy markets, financial markets and Eastern Europe on our dedicated webpage here . For India, the key …
25th February 2022
LIC stake sale will boost public finances… Local media has been awash with commentary about the long-awaited initial public offering (IPO) of Life Insurance Corporation (LIC) after the state-owned behemoth this week submitted its draft prospectus. From a …
18th February 2022
The RBI’s policy announcement – in which rates were left unchanged – was the main event this week and our initial response can be found here . One key takeaway was that the Bank remains relaxed about the inflation outlook, even as inflation appears to be …
11th February 2022
One of the more eye-catching elements of the Union Budget was the pledge that the RBI would introduce a Central Bank Digital Currency (CBDC) “starting 2022 and 23”. That would make the Reserve Bank a global front-runner. Many central banks are considering …
4th February 2022
Finance Ministry likely to bank recent fiscal gains For watchers of India’s economy, next week is one of the most significant of the year as Finance Minister Nirmala Sitharaman delivers the Union Budget for FY22/23 on Tuesday. Unusually, the fiscal …
28th January 2022
Virus cases peaking in parts of India Daily COVID-19 cases in India are still rising sharply and are now around an eight-month high. But encouraging signs are emerging in the state-level data. New infections have stabilised in Maharashtra, and they have …
21st January 2022
Halfway to the peak? India’s third virus wave is still building rapidly. New COVID-19 cases have doubled over the past week, with the Omicron strain likely driving the surge. The good news is that the impact on healthcare remains manageable. For example, …
14th January 2022
Economic impact of a third wave may be limited New daily COVID-19 cases in India have surged fifteen-fold in the last two weeks to their highest since June. The Omicron variant has been identified as the dominant strain in several parts of the country, …
7th January 2022
Some notable hits, but growth forecast a miss We will be publishing our Key Calls for 2022 in due course but, in our last Weekly of 2021, we take a look at what we got right and wrong this year. On balance, there were more hits than misses (the calls can …
17th December 2021
Higher food prices could test RBI’s resolve The key event this week was the RBI’s policy meeting , during which rates were left on hold, as widely expected. But there is concern in some quarters that the central bank is being complacent about inflation. …
10th December 2021
Finance Ministry could respond to new virus wave India reported its first cases of the Omicron variant yesterday. Plenty of uncertainty remains about the new variant, but we outlined some of the key factors that could determine the extent of the economic …
3rd December 2021
Winter parliament session set to disappoint The winter session of parliament begins on Monday with all indications point to it being a disappointment on the reform front. Fractious politics in the Rajya Sabha (upper house of parliament) – where PM Modi’s …
26th November 2021
Investment facing long-term headwinds In a speech to the Confederation of Indian Industry (CII) this week, Finance Minister Nirmala Sitharaman made an impassioned plea for the private sector to play a greater role in the economic recovery by ramping up …
19th November 2021
Coal inventories have bottomed out Coal-fired power plants in India now have on average enough stocks to last seven days. (See Chart 1.) That’s an encouraging improvement after the sharp plunge in inventories two months ago, and it should help to ease …
12th November 2021
Hike in reverse repo rate not imminent Recent measures by the RBI to further drain liquidity from the banking system have been fuelling hawkish monetary policy expectations. Overnight index swap rates have jumped over the past week. And several analysts …
5th November 2021
Rising oil prices not yet a concern Global oil prices rallied further this week to multi-year highs, and sustained increases could be economically-destabilising for India. After all, it is one of the world’s largest net importers of oil, and high global …
29th October 2021
Vaccine demand appears to be waning India administered its billionth COVID-19 vaccine dose this week, marking a significant milestone in the country’s rollout. But the aggregate figures mask a worrying recent slowdown in the vaccination drive. The number …
22nd October 2021
Industry hit by supply constraints Lacklustre industrial production data for August released this week were in part a reflection of a weak auto sector, which has been struggling to maintain output in the face of global semiconductor shortages. Vehicle …
15th October 2021
Persistent shortages are a growing downside risk India is the latest major economy to be facing concerns about energy supply. Coal-fired power plants have on average enough stocks to last only four days, well below usual levels. (See Chart 1.) Chart 1: …
8th October 2021
Improving tax revenue aiding the fiscal position Data released this week show that after five months of FY21/22 (April to August), the cumulative central fiscal deficit stood at 31% of the overall annual budget estimate. That is far smaller than normal …
1st October 2021
Exports to resume, but local rollout takes priority Health Minister Mansukh Mandaviya this week announced that India will resume exporting COVID-19 vaccines from October. India stopped supplying vaccines to the rest of the world in April when it was …
24th September 2021
Struggling telecoms get a financial lifeline Parliament this week approved several relief measures for India’s embattled telecoms sector. The most significant is a four-year moratorium on dues owed to the government. To operate in India, telecoms firms …
17th September 2021
Rollout picks up speed but vaccination rates low India’s vaccine rollout has shifted into a higher gear over the past couple of weeks. Daily vaccinations have risen from about 5mn in mid-August to 8mn in September. Importantly, this pace of vaccination …
10th September 2021
Activity data indicate sharp recovery in Q3 Much of the coverage of this week’s Q2 GDP release highlighted the record y/y growth rate, but that was due to the slump last year rather than recent economic strength. We estimate that GDP dropped by 12% q/q in …
3rd September 2021
Virus positivity rate in Kerala still rising Earlier this month, we flagged the sharp rise in new virus cases in Kerala as a key risk to economic recovery. On the face of it, there are encouraging signs that the outbreak is being brought under control. …
27th August 2021
Normalisation still some way off… We’ve argued for some time that the RBI is in no rush to join several of its emerging market peers in tightening monetary policy. That view was reinforced by the MPC’s relatively dovish communications at this month’s …
20th August 2021
Efforts to boost supply won’t have big impact Concerns continue to build over a new virus wave in India. While daily infections at the national level remain low, they are still elevated in Kerala and are now also rising in a handful of other states. These …
13th August 2021
Rising infections in Kerala a big cause for concern Economic activity has been staging a very strong recovery since the second virus wave receded. But we’ve argued for some time that the rapid reopening would increase the risk of new outbreaks, …
6th August 2021
A bankruptcy code to aid the COVID recovery The amendments to the Insolvency and Bankruptcy Code (IBC) that were approved in the Lok Sabha (lower house of parliament) this week would, if passed in the Rajya Sabha, provide much-needed support to India’s …
30th July 2021
Activity already close to pre-virus levels One key lesson from the past 18 months is that economies can rebound quickly once virus waves have subsided. Even with this mind, the pace at which activity in India has rebounded from its second wave has been …
23rd July 2021
Bad bank will help to improve balance sheets The contours of India’s long-awaited National Asset Resconstruction Company (NARCL) – or “bad bank” – have emerged over the past couple of weeks. In recent decades, bad banks have been used to clean up …
16th July 2021
Inflation won’t threaten monetary policy outlook The yield on India’s ten-year government bond this week jumped to its highest since the start of April. (See Chart 1.) Overnight index swap rates have also spiked since mid-June. Taken together, they point …
9th July 2021
Fiscal package won’t significantly raise the deficit Finance Minister Nirmala Sitharaman unveiled an array of new fiscal measures this week. (See Table 1.) The bulk of them are aimed at softening the economic blow from the second virus wave. They should …
2nd July 2021
Rollout gathers pace but doubts remain India’s COVID-19 vaccine rollout appears to have shifted into a higher gear. Daily vaccinations have more than doubled over the past couple of weeks, and on Monday India reported administering a whopping 8.7mn doses. …
25th June 2021
Recovery might be faster than we are expecting The continued drop in new COVID-19 infections – to their lowest now since April – has coincided with a rebound in the real-time activity data. One striking example is the pick-up in railway passenger …
18th June 2021
Rains still have a significant economic impact… The annual monsoon rains reached India’s west coast this week. The Indian Meteorological Department (IMD) is forecasting that the rains – which typically continue until late September – will be around …
11th June 2021
Lockdowns extended despite falling cases The drop in new virus cases in India is now broad based across almost all states, including large ones such as Karnataka, Maharashtra and West Bengal. (See Chart 1.) Even so, lockdowns were this week extended in …
4th June 2021
Recovery might be more gradual than last year New virus cases in India continue to drop sharply and have almost halved from their peak just a couple of weeks ago. The drop has coincided with an apparent bottoming out in some of the real-time activity …
28th May 2021