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The widening in India’s goods trade deficit in June came on the back of a rebound in imports amid the lifting of containment measures and the recent rally in global oil prices. But while the economic recovery has further to run, we think that oil prices …
16th July 2021
WPI inflation has peaked Wholesale price inflation dropped for the first time in five months in June and is set to fall sharply over the coming months as commodity prices drop back. With headline CPI inflation also likely to have peaked last month, we …
14th July 2021
Headline inflation has likely peaked India’s consumer price inflation remained above the 6% upper limit of the RBI’s target range for a second consecutive month in June. But if we are right in thinking that inflation has peaked, the central bank won’t see …
12th 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
The government’s latest vaccine supply projections suggest that India could fully vaccinate all adults by year end. But that hinges on optimistic assumptions about production and distribution. Unless supply and logistical issues constraining the rollout …
7th July 2021
PMI readings to soon rebound, but downside risks still significant The drop in India’s PMI readings for June should soon reverse as the second virus wave has subsided and restrictions are being eased. But a rapid reopening increases the risks of fresh …
5th 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
Overview – India’s ferocious second virus wave is subsiding as quickly as it emerged, enabling the recovery to get back on track. However, the rapid scaling back of containment measures that is underway increases the threat of further outbreaks. And …
1st July 2021
Manufacturing still impacted by second virus wave The drop in India’s manufacturing PMI in June suggests that the recent plunge in new virus cases has yet to translate into a pick-up in manufacturing activity. The recovery should get back on track as …
Industry has taken a sizeable hit India’s core infrastructure industries index dropped sharply in m/m terms in May, suggesting that the second virus wave has taken a large toll on industry even though it has been subject to fewer restrictions than a year …
30th June 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
India’s 10-year government bond yields have remained stable at around 6% over the past month, taking the unexpectedly large jump in inflation in May and a more hawkish turn by the US Fed in their stride. That reinforces our long-held view that borrowing …
23rd June 2021
The recent jump in India’s consumer price inflation has taken us (and most others) by surprise and we have revised up our near-term forecasts. However, a big chunk of the surge – even in the most closely-watched core measure – can be explained by rising …
22nd 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
India’s goods trade deficit narrowed to an eight-month low in May as exports held up much better than imports. Strong external demand will help to offset some of the damage to domestic demand caused by the virus surge and ramping up of containment …
16th June 2021
Larger-than-expected jump in inflation should reverse soon India’s consumer price inflation jumped to a six-month high in May on the back of an unexpected surge in core inflation, which we suspect is a result of rising commodity prices now seeping into …
14th June 2021
WPI inflation close to peaking Wholesale price inflation surged to a three-decade high in May on the back of the sharp rise in global commodity prices and will be a concern for policymakers. However, there are reasons to think that WPI inflation has …
Subdued industry delivers triple-digit growth There is unlikely to be a clearer illustration of the distorting impact of base effects than the 134% y/y rise reported in Indian industrial production in April. Industrial output actually dropped in April as …
11th 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 …
Remittance flows into India have been resilient in recent months and, with employment prospects for Indian migrants looking better than a year ago, they should continue to hold up well. That should provide some much-needed support for the economic …
9th June 2021
The Reserve Bank kept the repo rate on hold at a record low today and announced plans to ramp up government bond purchases on the secondary market, underlining its commitment to supporting the recovery. With the economy likely to take time getting back to …
4th 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 …
India’s ferocious second wave of COVID infections is likely to have caused the economy to contract by about 5% over Q2 as a whole. The good news is that the outbreak is quickly subsiding and activity appears to have bottomed out. But the recovery is …
3rd June 2021
Recovery beyond the second virus wave will be slow India’s PMI readings for May adds to evidence elsewhere that the damage from the second virus wave has not been as severe as when the pandemic first struck last year. But with restrictions likely to be …
Manufacturing takes a hit, recovery ahead likely to be gradual The drop in India’s manufacturing PMI to a ten-month low in May suggests that activity has taken a hit from the second virus wave despite the sector being largely exempt from containment …
1st June 2021
Solid Q1 gives way to Q2 contraction The smaller than expected rise in Indian GDP in Q1 will be followed by a significant contraction in Q2 caused by the virus surge and tightening of containment measures. While the real-time activity data have bottomed …
31st May 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
RBI likely to keep rates on hold next week as second virus wave subsides However, recovery may be more gradual than last year as states reopen with caution As such, policy will stay loose for a long while yet We agree with financial markets and the …
27th May 2021
Employment damage could quickly reverse High-frequency data show that virus restrictions and voluntary social distancing continue to exert an economic toll, albeit less severe than last year. Labour market indicators are a case in point. Of course, there …
21st May 2021
New virus cases in India remain extremely high, but some solace can be taken from the fact that they have dropped rapidly over the past couple of weeks back to their level in mid-April. The share of tests returning positive has fallen too. Encouragingly, …
20th May 2021
There is typically more scope for female participation rates to rise and boost labour supply in EMs. This is particularly so in India and is one reason why we expect its economy to outperform in the long run. Increasing female labour force participation …
19th May 2021
Fuel-driven rise in headline WPI inflation will be short-lived The surge in Indian wholesale price inflation in April was driven in large part by the rally in commodity prices, which we think will reverse over the coming months. That should allow the RBI …
17th May 2021
Goods trade data for April add to evidence from elsewhere that that the new round of virus restrictions has not been as economically disruptive as the national lockdown last year. India’s goods trade deficit widened from $13.9bn in March to a four-month …
Supply issues are holding back vaccinations New virus cases in India remain extremely high, though the slower pace of increase and lower share of tests returning positive offers some hope that the current wave is close to peaking. However, lacklustre …
14th May 2021
Headline inflation to remain anchored below RBI’s 6% upper limit India’s consumer price inflation dropped to a three-month low in April, adding to evidence elsewhere that the recent tightening of virus restrictions has not been as economically disruptive …
12th May 2021
Real-time data indicate that industry in India has not been hit as severely as services, and is holding up well compared to a year ago. That’s a reflection of the more targeted restrictions that have so far been introduced. But there is also evidence of …
10th May 2021
Cases stabilising in key states There are both glimmers of hope and causes for alarm in the latest infection numbers. On the one hand, there are early signs that the crisis in Maharashtra, Delhi and Uttar Pradesh might have peaked, with virus cases …
7th May 2021
The impact of India’s COVID-19 crisis on other EMs through normal economic channels such as trade and financial links should be manageable. The more serious impact will come through delays to vaccine rollouts, particularly for countries in South Asia and …
5th May 2021
In an unscheduled announcement today, RBI Governor Shaktikanta Das unveiled an array of measures aimed at mitigating the economic and financial impact of India’s virus crisis. This Update takes stock of those measures and outlines what they might mean for …
Limited economic impact so far, but more to come still India’s PMI readings for April suggest that economic activity has held up fairly well despite the latest set of containment measures. But with virus cases still extremely high, tighter and …
Results of the state elections that have been taking place over the past couple of months are unlikely to have undermined the BJP’s willingness to implement difficult economic reforms, particularly given its victory in Assam. But at the same time, the …
3rd May 2021
Manufacturing PMI holds up, but headwinds are mounting India’s manufacturing PMI held up well in April, reflecting the fact that the containment measures in response to the surge in COVID-19 cases have been very light touch compared to last year. But the …
Rebound in industry overtaken by second wave India’s core infrastructure industries index rebounded in March, but this is old news given the dramatic surge in virus cases and renewed tightening of containment measures since then. The core infrastructure …
30th April 2021
With the surge in COVID-19 infections showing no signs of abating and containment measures being reimposed, concerns about spill-overs to the real economy are growing. So far, activity is holding up well . But policymakers are likely to be concerned by …
Real-time data on traffic, electricity demand and mobility suggest that, so far at least, India’s virus outbreak has had more of an impact on behaviour than it has on activity. We will continue to keep close tabs on the high-frequency data over the coming …
27th April 2021
Restrictions may need further tightening The surge in new COVID-19 cases in India and subsequent tightening of state-level restrictions has started to weigh on activity . (See Chart 1.) Chart 1: CE India Mobility Tracker (% Diff. from Jan.-6 th Feb. 2020, …
23rd April 2021
The minutes of the Reserve Bank’s April policy meeting – in which interest rates were left unchanged – show that the MPC is committed to keeping policy accommodative to support the economic recovery. The surge in virus cases since that meeting is only …
Our in-house mobility tracker suggests that the surge in virus infections in India is now weighing on activity. (See Chart 1.) This is likely to become more pronounced as the outbreak has become more widespread, causing several state assemblies to tighten …
21st April 2021
Headwinds to investment mounting Industrial production data released this week showed that output growth dropped further into negative territory in February. Looking at the breakdown, tepid capital goods production suggests that investment growth will …
16th April 2021
The widening in India’s goods trade deficit in March came on the back of a surge in monthly gold imports to its highest on record. But this was driven in part by one-off factors. Looking ahead, we expect gold import values to remain contained over the …
15th April 2021
