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Given growing worries about public health and the devastating economic impact of India’s lockdown, the current rate of inflation should not constrain the actions of policymakers. Further ahead though, the likelihood that inflation remains low will allow …
7th May 2020
The RBI’s new special liquidity window should help ease redemption pressure on Indian mutual funds, which have come under strain since Franklin Templeton’s announcement on Thursday that it has been forced to close six of its debt schemes. But another …
27th April 2020
The government’s reluctance to provide significant financial support for firms and households during lockdown means that non-performing loans are likely to surge. One legacy of the coronavirus in India is therefore likely to be an impaired banking sector …
21st April 2020
The RBI has taken further steps to help banks and borrowers weather the collapse in economic activity from the coronavirus and containment measures in another emergency announcement today. The central bank also left the door open for further loosening, …
17th April 2020
The collapse in both exports and imports in March highlights the extreme weakness of external and domestic demand. What’s more, the worst is yet to come as lockdowns to contain the spread of the coronavirus remain in place in both India and abroad. …
16th April 2020
PM Modi’s decision to extend the nationwide lockdown that was due to end today comes as no major surprise given that coronavirus cases in India continue to surge. With many households having no savings buffers and large parts of the economy remaining …
14th April 2020
Timely indicators on electricity demand, vehicle production and air quality strongly suggest that industrial activity has fallen off a cliff since the nationwide lockdown began on 25 th March. These indicators will be worth watching closely when the …
9th April 2020
Given the concerns about public health and the impact of the national lockdown, the current rate of inflation should not constrain the actions of policymakers. Further ahead though, the likelihood that inflation remains low will allow policy to be kept …
8th April 2020
The Finance Ministry’s response to the coronavirus so far has been tepid and, unless it steps up, it risks turning the public health crisis into a humanitarian and banking crisis. We assume it will do a lot more. One issue is that further stimulus will …
7th April 2020
The RBI has emphatically stepped up its response to the economic and financial market fallout from the coronavirus outbreak with another emergency announcement today. It has also left the door wide open for further monetary loosening. A similarly-bold …
27th March 2020
The measures to contain the spread of the coronavirus announced by PM Modi last night will be hard to fully implement but will still have severe economic repercussions. We now expect the economy to grow by just 1% this year, the weakest pace of annual …
25th March 2020
The number of confirmed coronavirus cases in India is now rising sharply and, in response, most states have implemented full or partial lockdowns. With many households likely to have very low savings buffers, the central government will urgently need to …
24th March 2020
Foreign portfolio flows out of India’s markets have surged over the past month to more than double the peak during the “Taper Tantrum” in 2013, which pushed India to the brink of a balance of payments crisis. Higher foreign exchange reserves and a smaller …
23rd March 2020
Prime Minister Modi’s address this evening seemed intended mainly to raise awareness of the threat posed by the coronavirus in India. With case numbers still low, the government has taken few measures to contain the domestic spread. But the difficulty of …
19th March 2020
The RBI announced some measures to boost bank liquidity in a hastily-arranged press conference today but disappointed the bond market by not lowering policy rates. With the coronavirus a growing threat to domestic activity, we think rates will be trimmed …
16th March 2020
India’s merchandise trade deficit narrowed to a one-year low in February and the collapse in oil prices since then should push the deficit even lower in the months ahead. As such, we now expect the current account to swing into surplus – a crucial …
The plunge in oil prices over the past week means there’s a good chance that India records a rare current account surplus over the coming quarters. This should help to ensure that the rout in local financial markets – trading on the Sensex had to be …
13th March 2020
The rising number of new coronavirus infections in Asia beyond China has largely been confined to Korea and Japan. But poor healthcare provision, the density of population and high levels of internal migration in the early stages of the monsoon season …
11th March 2020
Though the RBI’s takeover of Yes Bank is intended to reduce the direct threat posed by the failing bank to India’s financial stability, the measures that have been implemented could exacerbate systemic weakness in the banking system. This adds to the …
9th March 2020
Headline consumer price inflation is likely to have dropped sharply in February, in large part due to a moderation in food inflation. This should further embolden the RBI to follow its global peers and cut interest rates over the coming weeks in response …
5th March 2020
The rapid global spread of the coronavirus has prompted us to lower our 2020 GDP growth forecast for India to 5.3%, from 5.7% previously. And there is now a high chance that the RBI follows the lead of other central banks by cutting interest rates in …
4th March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
Revisions to India’s GDP data suggest that the recent slowdown started earlier, and problems in the shadow banking sector have had a more acute impact on the economy, than previously thought. But arguably the most worrying aspect of the new data is that …
The Supreme Court’s ruling that Vodafone’s joint venture in India must pay up to US$7bn in retrospective levies and penalties has grabbed headlines over the past few days. In this Update , we answer three key questions about the current situation and its …
20th February 2020
A slump in investment has been the key factor behind the sharp economic slowdown over the past year. A spectacular rebound is not on the cards but investment should recover gradually over the coming quarters due to a combination of fiscal and monetary …
18th February 2020
India’s merchandise trade deficit widened to a seven-month high in January, but we think that a low level of commodity imports will help to prevent the external shortfall from ballooning to unsustainable levels over the coming months. India’s monthly …
17th February 2020
Headline consumer price inflation is likely to have edged up in January, in large part due to a continued increase in food inflation. Further ahead, food inflation is likely to ease, but we expect core inflation to rise over the coming quarters as the …
7th February 2020
While keeping rates on hold today, the RBI has kept the door open for further policy loosening over the coming months. But we doubt this will materialise, and expect the central bank to shift to tightening mode before the end of the year . All six member …
6th February 2020
The government’s hopes of hitting the record asset sales target in the budget for FY20/21 hinge on the smooth sale of large stakes in one of India’s worst-performing banks and a politically-important insurer. Neither is likely. The government may choose …
5th February 2020
The finance ministry set aside notions of near term fiscal consolidation by announcing additional stimulus in the FY20/21 union budget. That should help to support economic growth over the coming quarters, albeit at the cost of putting upward pressure on …
3rd February 2020
The narrowing in India’s goods trade deficit in December is likely to reverse over the coming months. But we think that a low level of commodity imports will help to prevent the external shortfall from ballooning to unsustainable levels. India’s monthly …
16th January 2020
Another surge in headline CPI inflation in December – most likely to a five-year high – would almost certainly bring an end to the RBI’s easing cycle. And a rise in core inflation over the coming quarters should prompt the central bank to switch to …
9th January 2020
The direct economic impact of the protests that began in opposition to the citizenship amendment bill is likely to be small. However, the protests have increased the chances of a larger fiscal stimulus in next month’s union budget, which would be positive …
6th January 2020
India’s monthly goods trade deficit widened in November and we expect this to continue into 2020. Nevertheless, with imports of key commodities set to remain low, we think that the external shortfall will still remain small by historic standards. Data …
16th December 2019
The continued weakness of core inflation that we expect in November’s consumer price data will probably give the MPC scope to ease policy again in the near term. But the big picture is that the inflation backdrop is set to turn more difficult over the …
9th December 2019
The Reserve Bank unexpectedly left interest rates unchanged for the first time this year, following five successive rate cuts. Nevertheless, the MPC has left the door open for further easing in the near term and a rate cut in February now looks likely. In …
5th December 2019
We couldn’t agree more with recent comments from RBI Governor Shaktikanta Das that much better governance is needed to improve the long-term health of the banking sector. The problem stems in large part from the outsized role of the state. Privatisation …
18th November 2019
The monthly goods trade deficit was virtually unchanged in October and we think that it will remain small over the coming quarters as low oil prices continue to keep a lid on imports. Data released on Friday evening show that India’s monthly goods trade …
Moody’s decision to cut its outlook on India’s sovereign rating is based in part on the government’s struggle to rein in the fiscal deficit. This is justifiable if a little behind the curve. But the ratings agency’s decision is also based on its …
8th November 2019
Headline consumer price inflation is likely to have risen above the RBI’s 4.0% target for the first time in 15 months in October due to another jump in food inflation. This won’t dissuade the central bank from loosening policy further in the near term. …
7th November 2019
India’s goods trade deficit narrowed to a seven-month low in September and we think that it will remain small over the coming quarters as low oil prices continue to keep a lid on imports. Data released yesterday show that India’s monthly goods trade …
16th October 2019
Headline consumer price inflation is likely to have jumped in September on the back of a surge in onion prices. But that’ll hardly bring tears to the eyes of the RBI, as it is likely to have stayed below the 4.0% target. Another rate cut in December seems …
7th October 2019
The Reserve Bank reverted back to a 25bp rate cut today and has left the door open for further easing in the near term. But we are firmly non-consensus in expecting modest rate hikes by the end of next year. The MPC’s decision to cut the repo rate for …
4th October 2019
India’s current account deficit narrowed a touch in the four quarters to Q2 and looks unlikely to balloon any time soon as imports of key commodities remain in check. Meanwhile, FDI inflows edged up in Q2 and are likely to rise over the coming quarters as …
1st October 2019
Fiscal loosening measures announced by Finance Minister Nirmala Sitharaman today are likely to provide a small boost to economic growth over the coming quarters, but significantly increase the chances of the ministry missing its budget deficit target this …
20th September 2019
The goods trade deficit was virtually unchanged in August and, even if export growth stays weak, we think that the shortfall will remain small over the coming quarters. Data released on Friday evening show that India’s monthly goods trade deficit widened …
16th September 2019
Headline consumer price inflation is likely to have risen in August, due in large part to a renewed pick up in food inflation. But it will remain comfortably below the RBI’s 4.0% target. And given the weakness of GDP growth in Q2, further rate cuts are …
6th September 2019
The government’s plan to merge several state-run banks is another step in the right direction towards fixing the beleaguered system. It follows a recent increase in the size of the recapitalisation package and strengthening of the bankruptcy code. But …
2nd September 2019
Measures announced by the government yesterday to loosen restrictions on FDI are a welcome step and we think that further reforms aimed at attracting foreign investment are likely over the coming months. That bodes well for India’s external position and …
29th August 2019
The minutes of the Reserve Bank’s August policy meeting suggest that the MPC’s larger-than-expected rate cut was intended in part to send a dovish signal rather than simply being a case of “front-loading” loosening. This supports our view that further …
22nd August 2019