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The first briefing from the RBI’s new governor, Shaktikanta Das, sought to provide assurance that the central bank will continue to prioritise inflation fighting. But his background at the finance ministry and as a Modi loyalist suggests that he is more …
12th December 2018
A disappointing set of state election results for Prime Minister Modi’s BJP suggests that the ruling national party has lost some goodwill and the risk now is that, in response, fiscal (and potentially even monetary) policy is loosened ahead of the …
11th December 2018
The resignation of RBI Governor Urjit Patel signals that the government has come out on top in its dispute with the central bank, but at the cost of undermining the RBI’s credibility and its inflation-fighting credentials. The rupee has dropped 1.5% …
India’s current account deficit widened in Q3 but we don’t think this should reignite concerns over the external position. With oil prices having dropped sharply since then, the deficit will remain comfortable over the coming quarters. … Oil price drop to …
10th December 2018
Some have interpreted the small cuts to the statutory liquidity ratio announced by the RBI this week as evidence that the central bank is loosening policy, but we disagree. Meanwhile, the state election taking place in Rajasthan today is significant for a …
7th December 2018
Consumer price inflation is likely to have eased again in November due to a sharp drop in fuel price inflation. But with core inflation likely to remain elevated for a while yet, we think the tightening cycle still has a little bit further to run. … …
6th December 2018
The Reserve Bank of India (RBI) kept rates on hold today, but continued to flag several upside risks to the inflation outlook in its accompanying statement and maintained the hawkish description of its policy stance. As such, we think that the tightening …
5th December 2018
India’s manufacturing PMI jumped again in November, defying the drop in the PMI readings across most of Asia. Looking ahead, prospects for local manufacturers remain fairly bright over the near term. … Manufacturing PMI …
3rd December 2018
Indian GDP growth slowed in Q3 but remained strong by recent standards. The economy should continue to expand rapidly over the coming months, supported by looser fiscal policy ahead of next year’s general election. … GDP …
30th November 2018
The recent drop in corporate bond issuance has been taken by many as a sign that a rise in the risk premium since the debt default by IL&FS Group is constraining local firms’ ability to borrow. The concern from the macro-perspective is that this will …
The revised GDP data for the past decade that have just been released suggest that recent growth has been further above India’s sustainable rate than previously thought. This underlines why the government’s attempts to strong-arm the RBI into loosening …
29th November 2018
The recent drop in headline inflation, coupled with the sharp fall in global oil prices, should be enough to ensure that the RBI keeps policy rates on hold at the conclusion of its meeting on Wednesday 5th December. However, with core inflation still …
28th November 2018
The RBI’s highly-publicised board meeting passed without much incident this week, but this has by no means eased the tensions between the central bank and government, nor concerns over the RBI’s independence. The first test of the ceasefire is likely to …
23rd November 2018
As one of the world’s largest net importers of oil, India should be a key beneficiary of the recent slide in global oil prices. If prices remain lower, as we think likely, the oil import bill will fall and the current account deficit should shrink. We …
21st November 2018
The Reserve Bank of India (RBI) and the government found common ground on some of the points of contention between them at the Bank’s board meeting yesterday. But key issues remain unresolved, and the sense that the government is trying to strong-arm the …
20th November 2018
Indian media has been awash with reports this week that RBI Governor Urjit Patel could quit his post at the Bank’s board meeting on Monday. We think this is unlikely but if he were to resign, local markets would come under pressure. The extent of the …
16th November 2018
India’s merchandise trade deficit widened in October but we don’t think this should reignite concerns over the external position. With oil prices falling and the rupee having weakened in trade-weighted terms, we think that the deficit will narrow over the …
The rise in wholesale price inflation in October was due in large part to a jump in core inflation. With underlying price pressures set to remain elevated, we think the RBI’s tightening cycle still has a little further to run. … Wholesale Prices …
14th November 2018
Upcoming state elections in India will, as ever, have an important bearing on economic policy at the local level. They will also go some way to determining whether the ruling BJP will be able to gain control of the upper house of parliament, which on …
13th November 2018
A renewed drop in food inflation pulled down headline inflation in October, but with core inflation rising again we still think that the Reserve Bank’s tightening cycle has a little further to run. … Consumer Prices (Oct.) & Industrial Production …
12th November 2018
Consumer price inflation is likely to have eased in October following a renewed drop in food inflation. This may prove enough to keep the RBI on the side-lines in its meeting next month. But with core inflation likely to remain elevated for a while yet, …
8th November 2018
The benefits of the government’s demonetisation policy should be evident by now, two years after the shock announcement that the bulk of the country’s bank notes were being withdrawn. But the promised gains haven’t materialised and the positive …
5th November 2018
Rising tension between the government and the RBI has dominated headlines this week, and also caused jitters in local markets. This comes as little surprise - after all, at the heart of the matter is the independence of the central bank. Any erosion of …
2nd November 2018
India’s manufacturing PMI jumped in October, bucking the trend across most of Asia. Looking ahead, prospects for local manufacturers remain fairly bright over the near term. … Manufacturing PMI …
1st November 2018
The Indian government is treading on dangerous ground with a number of moves that could put the independence of the Reserve Bank of India (RBI) at risk. A loss of credibility for the central bank could jeopardise its efforts to rein in inflation, which …
31st October 2018
Data released this week show that bank lending to the private sector grew at its fastest rate since 2014 in September, and there are good reasons to think that the sustained pick-up since the start of the year has further to run. This should help in large …
26th October 2018
India’s shadow banking sector has been thrust into the spotlight over the past few weeks, triggered by news that the Infrastructure Leasing & Financial Services (IL&FS) Group is likely to miss several debt repayments this year. Fears over contagion in the …
24th October 2018
The minutes of the Reserve Bank’s October policy meeting show that, despite keeping rates on hold, the MPC continues to place great importance on preserving its recently-acquired credibility. With this in mind and given that core inflation is still …
22nd October 2018
In an effort to put its finances back onto the track set out in this year’s budget, the government is now considering ordering state-owned firms to initiate share buybacks, according to reports this week. Ultimately though, we suspect that the finance …
19th October 2018
The narrowing in India’s merchandise trade deficit in September should help to temper some of the concerns that have recently been building over the external position. And looking ahead, we think that the deficit will narrow further over the coming …
16th October 2018
The rise in wholesale price inflation in September was due in large part due to a significant rebound in food inflation. But core inflation also remained elevated, supporting our view that the RBI’s tightening cycle still has a little further to run. … …
15th October 2018
Consumer price inflation crept only a little higher last month. But with core inflation still well above the Reserve Bank’s target, we think that the tightening cycle has a little further to run. … Consumer Prices (Sep.) & Industrial Production …
12th October 2018
The Electoral Commission confirmed this week that five state elections will take place before the end of 2018. As ever, these will have an important bearing on economic policy at the local level, and will also go some way to determining whether the ruling …
GDP growth has surged in recent quarters and, while it has probably peaked, we expect it to remain strong ahead of the general election in the first half of 2019. Thereafter, a focus on fiscal tightening and the lagged impact of recent rates hikes means …
11th October 2018
Remittances from abroad are a vital – yet often underappreciated – source of funding for India at the macro level, and provide significant financial support for millions of families. Remittances may not grow as fast as the wider economy over coming years …
9th October 2018
Consumer price inflation is likely to have risen in September, in large part because the recent sharp fall in food inflation appears to have reversed. More important from the policy perspective, core inflation is likely to have remained elevated. The …
8th October 2018
The Reserve Bank of India (RBI) unexpectedly kept rates on hold today, but flagged several upside risks to the inflation outlook in its accompanying statement and explicitly shifted to a more hawkish formal description of its policy stance. As such, we …
5th October 2018
We think that the recent fall in Indian equities – down by another 4% this week – has further to run. Domestically, concerns over the scale of balance sheet problems in the shadow banking sector will rumble on for a while yet. And even with the recent …
India’s manufacturing PMI rose in September, continuing the recent run of positive economic data. Looking ahead, prospects for local manufacturers remain fairly bright over the near term. … Manufacturing PMI …
1st October 2018
After spending years in the background amid the well-documented struggles of state-owned banks, India’s “shadow” banking sector has been thrust into the spotlight over the past week following news that a local lender will miss several debt repayments this …
28th September 2018
Ever since starting its rate-hiking cycle in June, the RBI made clear that the future path of monetary policy will be determined by incoming data. With GDP growth surging to a two-year high in Q2 and core inflation remaining elevated, there are good …
27th September 2018
The government’s announcement this week that it will merge three state-run banks is another step in the right direction towards fixing the beleaguered banking system, following on from the recapitalisation programme and the strengthened bankruptcy code. …
21st September 2018
There have been some notable shifts in Indian policymakers’ approach to foreign trade over the past month. For a start, the continued slide in the rupee caused the government to announce measures to restrict imports of “non-essential” items. At the same …
20th September 2018
The continued weakness of the rupee has triggered speculation this week that policymakers are about to adopt special measures to shore up the currency. One possibility is the reintroduction of a scheme used during the “Taper Tantrum” to attract foreign …
14th September 2018
The moderation in wholesale price inflation in August was in large part due to another drop in food inflation. But core inflation remained elevated, supporting our view that the RBI’s tightening cycle still has a little further to run. … Wholesale Prices …
Another sharp drop in food inflation pulled down headline consumer price inflation in August. But core inflation remains high and we still think that the Reserve Bank’s tightening cycle has a little further to run. … Consumer Prices (Aug.) & Industrial …
12th September 2018
India’s current account deficit remained at a sustainable level in Q2, confounding the fears that some had expressed of a sharp widening. What’s more, the deficit is now being financed primarily by foreign direct investment, which should remain relatively …
10th September 2018
The latest slide in the rupee appears finally to have jolted the RBI into action, with widespread reports of intervention today. We doubt that this will draw a line under the rupee’s decline. Meanwhile, the reliability of the GDP data is again being …
7th September 2018
Headline consumer price inflation is likely to have eased in August, in large part due to another fall in food inflation. But more important from the policy perspective, core inflation is likely to have remained elevated. The upshot is that the RBI’s …
5th September 2018
India’s manufacturing PMI dropped in August, suggesting that growth in the sector has lost a bit of momentum in Q3 after a very strong Q2. … Manufacturing PMI …
3rd September 2018
