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Friendshoring into India has for the most part been limited to high-end manufactured goods, but broader supply chain reconfiguration into the country could take place if the Trump administration imposes a 60% tariff on China. Trump has also been critical …
21st November 2024
Powerhouse state takes to the polls The dust is settling on the US election and we’ve been considering the implications for different economies and asset classes; clients can see all of our work on this dedicated webpage . For India Watchers, the action …
15th November 2024
We argued 18 months ago that the sharp rise in unsecured lending left India’s financial sector at risk of rising defaults, and anecdotal evidence suggests that this risk is materialising. The chances of a full-blown banking crisis in India are low, but a …
13th November 2024
Inflation jump scuppers December rate cut hopes Another bigger-than-expected jump in headline consumer price inflation last month will be enough to convince a majority of MPC members that conditions are not yet right to begin easing policy. We now think …
12th November 2024
Trump trade puts rupee under pressure All of our analysis of the US election can be found on this webpage and in the recording of an online briefing held after the result on 6 th November. In terms of the market reaction, the “ Trump trade ” has been in …
8th November 2024
The past week has been one of the more eventful for India in recent memory on the geopolitical front. The most eye-catching development was an agreement with China on patrolling arrangements along their disputed border in the Himalayas. News of the …
25th October 2024
The latest activity data have brought further evidence that India’s economy has entered a softer patch. Coupled with the RBI's change in policy stance in its October meeting, this suggests that monetary policy easing is still likely before long, despite …
24th October 2024
Activity data point to softer patch for economy The latest activity data have brought further evidence that India’s economy has entered a softer patch. Household consumption growth appears to be slowing. The RBI’s latest consumer confidence survey for …
18th October 2024
Contrary to many expectations in the aftermath of the BJP’s humbling in the general election, there is little evidence so far of Prime Minister Modi’s party shifting to more populist policymaking. And the risk of fiscal slippage has eased following …
15th October 2024
Rise in headline inflation unlikely to derail rate cuts The jump in India’s headline CPI inflation in September was larger than had generally been expected including by the RBI, so it raises the chances of the central bank proceeding with more caution. …
14th October 2024
RBI on course for December rate cut In a busy week for India Watchers, the key event was the Reserve Bank’s policy announcement on Wednesday. The MPC opted to keep the repo rate unchanged at 6.50%, with new member Nagesh Kumar the sole dissenter. But …
11th October 2024
The Reserve Bank of India’s new-look MPC voted to keep the repo rate unchanged at 6.50% today as expected but struck a less hawkish tone in its communications, which included a change in the official policy stance to more neutral language. This …
9th October 2024
RBI lays groundwork for December rate cut The Reserve Bank of India’s new-look MPC voted to keep the repo rate unchanged at 6.50% today as expected but struck a less hawkish tone in its communications, which included a change in the official policy stance …
Oil price risks still skewed to downside We learnt this week that India recorded a current account deficit equivalent to 1.5% of GDP in Q2 (Q1 of FY24/25), from a surplus of 0.5% of GDP in Q1. Of course, seasonal factors are at play; smoothed out over a …
4th October 2024
MPC shake-up has, on balance, given the panel a more hawkish bias We expect no change in the repo rate next week, a view shared by the consensus But conditions will be in place for policy loosening to start in December Little is known about the monetary …
2nd October 2024
The September PMIs from Asia generally declined from the previous month. And while the PMI surveys aren’t always a good guide to the hard activity data, their recent signals are consistent with our expectation for manufacturing activity in Asia to …
1st October 2024
We recently held a series of Asia-focussed roundtable discussions with clients in London, covering an array of topics including the impact of Fed easing, the US election, global fracturing and China’s stimulus blizzard. This Update answers several of …
Flagship policy falling short of aims This week marked the 10 year anniversary of PM Modi’s flagship “Make in India” policy initiative. Its aim was to encourage both foreign and local companies to develop, manufacture and assemble products in India and …
27th September 2024
The economy is cooling but remains primed to grow by 6.0-6.5% per year between 2024 and 2026, which would put India on course to become the world’s third-largest economy in the next couple of years. Headline CPI inflation is likely to remain close to the …
25th September 2024
RBI will focus on domestic factors rather than Fed Events this week have been dominated by the Fed’s 50bp rate cut to kick off its easing cycle. Clients can read our analysis of the decision here and watch our online briefing on demand here . Some EM …
20th September 2024
Overview – The economy is cooling but remains primed to grow by 6-6.5% per year between 2024 and 2026, which would put India on course to become the world’s third-largest economy in the next couple of years. Headline CPI inflation is likely to remain …
18th September 2024
More signs of a thawing in relations with China We recently took a deep-dive into the evolution in Sino-Indian relations (see here ), arguing that India’s attempt to establish more conciliatory relations with China speaks to an important way in which …
13th September 2024
Slight rise in headline rate tips balance in favour of October rate hold The slight rise in India’s headline CPI inflation in August reinforces our view that the Reserve Bank will proceed with a bit of caution and keep rates unchanged in its next meeting …
12th September 2024
The Fed’s upcoming monetary easing cycle will probably provide less of a tailwind to EMs than is widely thought. While it’s likely to give some central banks (such as in the Gulf, Mexico and Indonesia) a green light to lower interest rates, EM rate …
With a large and growing population and a bright long-term economic outlook, the stage is set for India’s commodity demand to boom. However, there are several reasons why India won’t have the same profound impact on global commodity markets as China has …
10th September 2024
Growth slowing, but economy still in good shape After all stellar run over recent quarters, data released late last week showed that GDP growth slowed in Q2 (Q1 of FY24/25) to 6.7% y/y, from 7.8% y/y in Q1. (See our initial response to the data here .) …
6th September 2024
GDP figures for Q2 show a sharper-than-expected slowdown in India’s economy. Looking ahead, we expect economic activity to moderate a bit further over the coming quarters. But the big picture is that the economy remains on track to grow by a world-beating …
30th August 2024
MPC dissenters Varma and Goyal to step down As was widely expected, it was confirmed this week that the MPC’s three “external” members (who have careers outside the RBI and are selected by the government) will step down when their current terms expire on …
The economy is on course to grow by 6.5-7% per year between 2024 and 2026, which would put India on course to become the world’s third-largest economy in the next couple of years. Headline CPI inflation is likely to have accelerated in August, but it …
27th August 2024
RBI Governor pushes back against change to target A longstanding debate in Indian policymaking circles over which measure of consumer price inflation the RBI should target has been reignited in recent weeks. In the Government’s Annual Economic Survey …
23rd August 2024
Regulator comes under fire in Adani Group saga The Adani Group/Hindenburg Research saga took a new twist this week, 18 months after the publication by the US short-seller alleging “brazen stock manipulation and account fraud over the course of decades” …
16th August 2024
Signs of a thaw in frosty relations between India and China don’t point to a fundamental realignment in India’s position in a fracturing global economy. But they highlight a growing theme of some EMs tactically courting investment from China to put …
13th August 2024
This page has been updated with additional analysis since first publication. Disinflation back on track The drop in headline consumer price inflation to a one-year low in July should reassure the RBI that June’s surprise jump was a one-off and that the …
12th August 2024
Our Asia team will be holding a Drop-In on Wednesday 14th August at 0830 ET/1330 BST to discuss the timing of Asian interest rate cuts and the impact of global markets volatility. Register here for the 20-minute online briefing. Weakening against a weak …
9th August 2024
The recent market turmoil didn’t move the needle for the MPC today: it continued to strike a hawkish tone as the majority of members voted to keep the repo rate unchanged at 6.50%. But with inflation set to fall back towards the RBI’s 4% target over the …
8th August 2024
RBI could ease policy by year-end The recent market turmoil didn’t move the needle for the MPC today: it continued to strike a hawkish tone as the majority of members voted to keep the repo rate unchanged at 6.50%. But with inflation set to fall back …
Fears of a US recession have rattled EM equity markets at a time when EM economies themselves are showing more pronounced signs of weakness. Most EM currencies have held up well, suggesting a dovish tilt may come from EM central banks – particularly those …
5th August 2024
Bond restrictions highlight investor wariness The Reserve Bank of India (RBI) this week announced restrictions on foreign investment on all newly-issued 14-year and 30-year local-currency sovereign bonds. Effective immediately, foreigners will now only be …
2nd August 2024
Upside inflation surprise in June has dashed hopes of rate cut next week But space for December rate cut will open as inflation heads back down to 4% We think upcoming loosening cycle will be more aggressive than consensus expects The upside inflation …
1st August 2024
Budget shows focus on employment for Modi 3.0 The government presented the FY24/25 Union Budget on Tuesday, in which it managed to further lower the deficit target while largely fulfilling the spending demands of the BJP’s new coalition partners. We …
26th July 2024
Strong public investment growth alongside overall fiscal prudence have contributed to the rallies in India’s bond and stock markets over the past couple of years. However, we don’t see much in the latest budget to revise our view that gains in the coming …
The economy is primed to grow by 6.5-7% per year between 2024 and 2026, which would put India on course to become the world’s third-largest economy within the next couple of years. Headline CPI inflation will gradually fall over the coming months, …
24th July 2024
Finance Minister Nirmala Sitharaman has shown a commitment to fiscal consolidation while for the most part placating the BJP’s coalition partners in today’s FY24/25 Union Budget announcement. There is always a chance of fiscal slippage, but recent success …
23rd July 2024
Full Budget a key test for new government For India watchers, the Union Budget announcement on Tuesday 23 rd July will be one of the key economic events this year. In election years, the Union Budget takes place later than normal and often contains new …
19th July 2024
The upside surprise to headline consumer price inflation last month has all but ended hopes of a rate cut at the RBI’s August policy meeting. But we think that the conditions will be in place for policy loosening to begin in December. To recap, headline …
16th July 2024
Surprise inflation jump scuppers August rate cut hopes The surprise jump in headline consumer price inflation last month will be enough to convince any MPC members who may have been leaning toward rate cuts at the August policy meeting that conditions are …
12th July 2024
Full Budget a key test for new government The Finance Ministry confirmed this week that the full Union Budget for FY24/25 will be unveiled on Tuesday, 23 rd July (recall that during election years, an “interim” Budget is held in February). We’ll be …
Much of the strength of India’s external position over recent years can be explained by robust growth in its services exports, in particular its business process outsourcing (BPO) sector. The near-term outlook for the sector is bright. But the sector also …
9th July 2024
Final preparations are reportedly in place for Prime Minister Modi to travel to Moscow early next week to meet his Russian counterpart Vladimir Putin. This will be Modi’s first trip to Russia since the invasion of Ukraine, though the two leaders did meet …
5th July 2024
More to plunge in inward FDI that meets the eye The Q1 2024 Balance of Payments data released this week has refocused attention on the slump in net foreign direct investment (FDI) inflows. In the four quarters to Q1, net FDI inflows dropped to US$26.5bn, …
28th June 2024
