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Resuming transport services a big risk Policymakers decided this week to further loosen containment measures by allowing some travel to resume. Restrictions on interstate passenger trains have been partially lifted, while domestic flights are due to …
22nd May 2020
Package will have limited impact on demand After weeks of inaction, the government has made a splash with its new support package by spreading the details across three separate announcements (and counting) this week. Table 1: Breakdown of COVID-19 Relief …
15th May 2020
Loosened restrictions having very small impact While the nationwide lockdown has again been extended (this time until 17 th May), the latest phase includes a significant relaxation of containment measures in so-called “green zones” where there have been …
8th May 2020
Labour market weakness, risk aversion heightened The immediate economic consequences of the virus and the measures to contain it are clear as day in the data, with most activity indicators having fallen off a cliff in March. However, there are now growing …
30th April 2020
Second package is already too late After an underwhelming first attempt, a second fiscal stimulus package in response to the coronavirus and containment measures appears close following reports of a meeting between PM Modi and Finance Minister Nirmala …
24th April 2020
March data show extreme weakness… A number of data releases this week confirm that economic activity took an enormous hit in March amid the nationwide lockdown. Trade data show that both export and imports slumped by over 30% y/y . That was far worse than …
17th April 2020
Containment measures not yet slowing virus spread Over two weeks have passed since India’s nationwide lockdown began. With restrictions initially scheduled to end next Tuesday, policymakers face a dilemma. On the one hand, despite India having more …
9th April 2020
Real-time indicators reveal slump The compilation of activity data for March and April will be severely curtailed as the Statistics Office is only partly operational amid the nationwide lockdown. That has placed extra importance on surveys and …
3rd April 2020
Fiscal loosening will need further ramping up Finance Minister Nirmala Sitharaman yesterday took her first shot at responding to the coronavirus outbreak – as well as measures to contain it – by announcing a fiscal package worth INR1.7trn (US$22bn, 0.7% …
27th March 2020
PM Modi, Governor Das take measured steps Both Prime Minister Modi and RBI Governor Das took cautious steps in their responses to the coronavirus outbreak this week. In his address to the nation last night, PM Modi announced a 14-hour self-curfew to take …
20th March 2020
Travel ban only the start of tougher measures The government’s announcement this week that it will suspend virtually all foreign visas for at least 30 days in a bid to contain the spread of the coronavirus won’t in itself have a major bearing on the …
13th March 2020
Concerns over coronavirus are growing The rapid spread of the coronavirus looks increasingly likely to hamper domestic demand. Admittedly, at the time of writing the number of confirmed cases in India stands at 30, which is low in such a large population. …
6th March 2020
Gold losing its shine (in India at least) India is one of the world’s largest importers of gold. The recent surge in prices of the precious metal – driven by safe-haven flows amid concerns over the impact of the coronavirus – might therefore be regarded …
28th February 2020
Low expectations for Trump visit Progress on trade negotiations (as well as the opening of the world’s largest cricket stadium in Ahmedabad) will be high on the agenda during US President Donald Trump’s visit to India next week. There are suggestions that …
21st February 2020
BJP policy shift unlikely after Delhi loss The Election Commission confirmed this week that the local Aam Aadmi Party (AAP) stormed to victory in the Delhi Union Territory election, winning almost 90% of the available seats. (See Chart 1.) Prime Minister …
14th February 2020
Finance ministry steps up These have been a busy few days for India’s policymakers. The finance ministry on Saturday confirmed in the Union Budget that it had changed tack and was aiming for much looser fiscal policy than it had been. (See here .) That …
7th February 2020
Sale of Air India a prop to the budget Ahead of tomorrow’s Union Budget, the government this week invited bids from potential investors in Air India. (Clients can read a preview of the Union Budget here .) Its sale would provide some much-needed revenues …
31st January 2020
FDI inflows to pick up despite risks UNCTAD reported this week that foreign direct investment (FDI) inflows to India rose to US$49bn (1.7% of GDP) in 2019 from US$42bn (1.5% of GDP) in 2018. This is a welcome development. FDI inflows are a more stable …
24th January 2020
Tentative signs of a recovery Local media has been awash this week with headlines about “stagflation” – a disquieting mix of stagnant or slowing economic growth and rising inflation. On the face of it, these concerns are justified in India today. …
17th January 2020
Recent developments raise odds of fiscal loosening Developments this week have raised the likelihood of Finance Minister Nirmala Sitharaman announcing more fiscal stimulus in next month’s union budget for FY20/21. First, the protests initially triggered …
10th January 2020
Surge in oil prices not yet a concern Global oil prices have surged today following news of a US airstrike that killed a top Iranian military leader. A further sharp increase could be economically-destabilising for India. After all, it is the world’s …
3rd January 2020
Vegetable price surge will keep RBI on sidelines RBI Governor Shaktikanta Das reiterated in a conference this week that, while the MPC unexpectedly kept rates on hold earlier this month, that didn’t necessarily signal the end of the loosening cycle. Mr …
20th December 2019
Bankruptcy code gets an upgrade The amendments to the Insolvency and Bankruptcy Code (IBC) that were approved in the Rajya Sabha (upper house of parliament) this week will provide much-needed support to India’s banking sector. One key change is that more …
13th December 2019
RBI waiting for clarity on fiscal loosening The Reserve Bank’s unexpected decision to keep interest rates on hold yesterday was primarily driven by its concerns over the spike in headline inflation above the 4.0% target in October. (Our response to the …
6th December 2019
BJP steps aside in Maharashtra Developments this week have brought an end to the political gridlock in Maharashtra. To recap, Prime Minister Modi’s BJP won the most votes in the recent state election there, but fell short of achieving an outright …
29th November 2019
Phone tariff hikes no immediate concern for RBI India’s three largest telecoms firms (Vodafone, Bharti Airtel and Reliance Jio) revealed this week that they will simultaneously raise mobile phone tariff prices at the start of next month. This appears to …
22nd November 2019
Monthly data suggest another weak quarter in Q3 After a very weak first half of the year, the latest monthly data suggest that the economy hasn’t fared any better in the second half. Data released this week show that industrial production contracted 4.3% …
15th November 2019
India drags its heels on trade agreement India this week opted out of the Regional Comprehensive Economic Partnership (RCEP), the Asia-wide trade deal that will be among the largest in the world when it finally becomes operational. The potential benefits …
8th November 2019
Finance Ministry easing alongside the RBI Only a few weeks after corporate taxes were cut, media reports this week suggest that the government is considering a reduction in the personal income tax rate, as well as an abolition of taxes on dividends paid …
1st November 2019
Rajya Sabha majority still on the cards The BJP’s disappointing performance in the Haryana state election is a setback for the government, but its victory in Maharashtra still leaves it on course to gain a majority in the Rajya Sabha (upper house). In …
25th October 2019
Credit growth will pick up as lending rates fall Data released this week showing that credit growth to the private sector dropped to a two-year low in September (see Chart 1) have raised concerns that the monetary transmission mechanism is lacking …
18th October 2019
Slip in competitiveness ranking should reverse The World Economic Forum’s (WEF) Global Competitiveness Index for 2019 released this week showed that India’s ranking slipped 10 places to 68 th out of 141 countries. (See Chart 1.) Chart 1: India’s WEF …
11th October 2019
PMC Bank fraud highlights governance concerns India’s authorities have recently received plaudits for their efforts to clean up the banking sector. But news this week of a fraud scandal at the Punjab & Maharashtra Co-operative Bank (PMC Bank) is a stark …
4th October 2019
Equity market exuberance likely to fade… The large-scale fiscal stimulus announced last Friday by Finance Minister Nirmala Sitharaman has continued to reverberate in markets. While most Asian equity markets have dropped, the Sensex is up by 2.5% this …
27th September 2019
Tax breaks, weaker rupee will have limited impact India’s goods trade deficit held steady at a low level in August. (See here .) However, export growth in value terms dropped to -6.0% y/y. Even focusing on the three-month average to smooth out monthly …
20th September 2019
Car sales data may overstate consumption weakness Data released this week show that new passenger vehicle sales slumped by over 30% y/y in August. This was the biggest monthly decline since records began in 2003. (See Chart 1.) This has inevitably …
13th September 2019
Gold imports to remain low Gold prices remain close to all-time highs in rupee terms, but the latest numbers on gold import volumes should assuage any concerns over the impact on the external position. Government officials announced this week that gold …
6th September 2019
RBI capital transfer will strengthen fiscal position… The RBI’s announcement this week that it would transfer a record dividend to the finance ministry in the current fiscal year on the recommendation of a panel study has a number of important …
30th August 2019
Corporate tax cut indicative of looser fiscal stance Hot on the heels of Prime Minister Modi’s recent call for looser policy to support economic growth (see here ), a government panel this week recommended that the corporate tax rate for all companies be …
23rd August 2019
Further loosening still likely in near term In a wide-ranging interview with the Economic Times published this week, Prime Minister Modi commented on several economic issues. Plenty of emphasis was placed on the measures taken to revive economic growth …
16th August 2019
Escalation of crisis would have limited impact The Indian government this week revoked a long-standing constitutional provision that granted special autonomy to the state of Jammu & Kashmir. The measures will split the state into two separate “union …
8th August 2019
Fiscal deficit target likely to be exceeded India’s fiscal deficit in Q1 of FY19/20 (April to June) provides little assurance about the government’s ability to meet the 3.3% target that it set in the union budget last month. Data released this week show …
2nd August 2019
Hawk’s flight from MPC points to more easing Dr Viral Acharya stepped down this week from his position as one of the six members of the RBI’s MPC, one month after handing in his resignation. Dr Acharya was one of the most hawkish members of the MPC. …
26th July 2019
Small amount of FX debt could bring benefits The finance ministry’s plans outlined in the FY19/20 union budget to issue a debut foreign-currency bond have drawn criticism from various quarters this week, ranging from esteemed former RBI governor Raghuram …
19th July 2019
Banking sector still needs governance reform India’s authorities have received plaudits in recent years for their efforts to clean up the banking sector. (See here .) But news this week of a fraud scandal engulfing Punjab National Bank (PNB) – the second …
12th July 2019
Economic Survey sets out lofty ambition The annual Economic Survey released this week differed from previous iterations as it placed more emphasis on India’s long-term outlook. Most notably, the Survey states that it is now an objective of the government …
5th July 2019
NPL ratio drops, but government’s work isn’t done The RBI reported this week that non-performing loans (NPLs) fell from 11.2% of total bank loans in March 2018 to 9.3% in March 2019. This is still extremely high by both historical standards and in …
28th June 2019