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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
Indian GDP growth beat most expectations in Q2 and is likely to continue expanding rapidly over the coming months, supported by looser fiscal policy ahead of next year’s general election. … GDP …
31st August 2018
Fuel prices have risen to record highs in most of India’s major cities in recent weeks. This creates a political headache for the ruling BJP ahead of next year’s general election. However, the price rises won’t have a major impact on inflation or monetary …
The rupee’s slide against the US dollar this year has been met with frenzied commentary in some quarters. But policymakers look comfortable with the weaker rupee. In particular, the RBI appears to have been less aggressive in intervening in FX markets in …
28th August 2018
The rupee has stabilised over the past week or so, but it remains very close to an all-time low against the US dollar. With sentiment towards EMs unlikely to improve dramatically any time soon, we have revised our forecasts. We now think that the rupee …
24th August 2018
The flooding in Kerala is among the worst in recent memory, and has already had a devastating human cost. But from an economic perspective at least, the damage should be manageable. … Economic implications of the Kerala …
23rd August 2018
Indian equities have continued to surge in August, with the benchmark Sensex stock index rising to a fresh record high of over 38,000 today. The recent strong performance in the Sensex compared to other equity markets is perhaps a reflection of the fact …
20th August 2018
Prime Minister Modi confirmed this week that his nationwide healthcare insurance scheme will be rolled out in September. Better healthcare provision could bring several benefits, from both an economic and wider perspective. But the government is …
17th August 2018
The minutes of the Reserve Bank’s August policy meeting – at which interest rates were hiked again – show that the MPC has placed great importance on preserving its recently-acquired credibility. With this in mind and given that core inflation is still …
The further widening in India’s merchandise trade deficit last month is likely to heighten concerns over the external position, particularly amid the broader deterioration in market sentiment towards EMs. But there are still reasons to think that the …
15th August 2018
Wholesale price inflation moderated in July after hitting a five-year high in June. But core inflation remained elevated, supporting our view that the RBI’s tightening cycle still has a little further to run. … Wholesale Prices …
14th August 2018
The drop in Indian consumer price inflation in July was due in most part to a sharp fall in food inflation. Core inflation remained elevated. As such, we think that the Reserve Bank’s tightening cycle has a little further to run. … Consumer Prices …
13th August 2018
Indian industrial production growth jumped in June, and prospects for the sector remain relatively upbeat over the near term. That said, the recent hikes to tariffs on textiles imports could end up doing more harm than good to local industry. … Industrial …
10th August 2018
Recent hikes to import duties on various textiles products appear to be an attempt by Prime Minister Modi and the BJP to shore up popular support ahead of the general election in early 2019. But while the moves may help some local manufacturers, they are …
Headline consumer price inflation is likely to have dropped in July, in large part due to a fall in food inflation. But core inflation is likely to have remained elevated by the standards of the recent past, underlining why the Reserve Bank felt it needed …
8th August 2018
Only one-quarter of Indian women of working age are in paid employment. If participation in the workforce could increase to the rates of other Asian countries such as Indonesia or the Philippines by 2025, the economy could be 15% larger than otherwise. …
7th August 2018
Data released this week show a rapid expansion of the central government’s deficit in the early part of this fiscal year. This is a common occurrence, as revenues tend to get ramped up in the latter months. Even so, there are a number of reasons to think …
3rd August 2018
The RBI opted to tighten policy again today against a backdrop of strong growth and rising inflation. The swiftness with which the central bank has responded to the jump in inflation should prevent the need for very aggressive policy changes in the …
1st August 2018
India’s manufacturing PMI dropped in July, following the trend across most of Asia. Nevertheless, the reading remains decent, and prospects for local manufacturers remain bright over the near term. … Manufacturing PMI …
The BJP-led government this week ruled out the possibility of issuing a blanket loan waiver for farmers ahead of next year’s general election. But this is something of a red herring. After all, waivers have already been announced in numerous states that …
27th July 2018
When hiking interest rates at its most recent meeting in June, the RBI made clear that the future path of monetary policy will be determined in large part by incoming data. With several indicators showing that activity remained strong in Q2 and core …
26th July 2018
Prime Minister Modi’s BJP comfortably defeated the vote of no-confidence initiated by opposition parties on Friday. The result isn’t a major surprise given that the BJP holds a majority in the Lok Sabha (lower house of parliament). In fact, the overall …
23rd July 2018
The BJP-led government faces a no-confidence vote triggered by opposition parties over the coming days. We highly doubt the motion will lead to the fall of the government, given that the BJP holds a majority in the lower house of parliament. But the …
20th July 2018
Policymakers don’t put much weight on the wholesale price measure of inflation, but the fact that it surged to its highest rate in almost five years in June and looks set to remain elevated suggests that the RBI will follow up its recent rate hike with …
16th July 2018
The further widening in India’s trade deficit last month, coupled with the growing protectionist threat from the US, will inevitably raise concerns. But unlike many other countries in Asia, India’s exposure – both direct and indirect – to a more …
While many other major EM equity markets have dropped recently amid rising fears of a global trade war, Indian equities have surged, with the Sensex reaching an all-time high this week. But while India isn’t as exposed to current global headwinds as many …
13th July 2018
Consumer price inflation rose to a five-month high in June and, with core inflation in particular set to remain elevated, we think the RBI will follow up last month’s hike in the repo rate with further modest policy tightening, perhaps even as soon as the …
12th July 2018
In principle, Prime Minister Modi’s plan to introduce a health insurance scheme could bring numerous benefits, including from a narrow economic perspective. But the government is allocating very little funding to the scheme and is not addressing …
11th July 2018
Confirmation this week that the government will implement large increases in the minimum support price (MSP) of key monsoon crops supports our view that rural incomes will strengthen significantly this year. This should underpin a pick-up in private …
6th July 2018
Economic growth has surged in recent quarters and we expect it to remain strong over the next year or so, supported by buoyant private and government consumption ahead of the general election that is due in mid-2019. Core inflation is also set to stay …
5th July 2018
Headline consumer price inflation is likely to have stayed well above target in June, due in large part to core inflation remaining elevated by the standards of the recent past. We think that this will ultimately prompt the Reserve Bank to follow up …
India’s manufacturing PMI jumped to a six-month high in June, building on the recent run of positive economic data. Looking ahead, prospects for local manufacturers remain bright over the near term. … Manufacturing PMI …
2nd July 2018
The drop in the Indian rupee to an all-time low this week has inevitably triggered comparisons with the Taper Tantrum in 2013. But we don’t think there is major cause for concern. The external position is much improved since 2013 and there are good …
29th June 2018
A sharp rise in inflation over recent months, and a jump in household inflation expectations, has raised concerns that the RBI has fallen behind the curve and is squandering its hard-won inflation-fighting credentials. By contrast, we see the RBI’s …
The Reserve Bank of India hiked its repo rate for the first time in four years earlier this month. Subsequent data showing that core consumer price inflation has risen to its highest rate since July 2014 underlined why the central bank felt it had to act. …
26th June 2018
The minutes of the Reserve Bank of India’s June policy meeting – at which interest rates were hiked – are dominated by concerns about upside risks to inflation and the potential for damage to the central bank’s recently-acquired credibility. The …
20th June 2018
India’s goods trade deficit widened in May, but should drop back over the coming months, helped by a combination of easing oil prices and restrictions on gold imports. India isn’t particularly exposed to a more protectionist US – exports to the US are …
15th June 2018
Policymakers don’t put much weight on the wholesale price measure of inflation, but the fact that it accelerated in May and looks set to remain elevated suggests that the RBI will follow up this month’s rate hike with further tightening over the coming …
14th June 2018
There was a widening in India’s current account deficit in Q1 over a four-quarter sum, but the bigger picture is that the external shortfall remains at a sustainable level. In addition, FDI inflows have picked up. Given this, the economy should still be …
13th June 2018
Consumer price inflation rose to a four-month high in May and, with core inflation in particular set to remain elevated, we think the RBI will follow up last week’s hike in the repo rate with further modest policy tightening over the coming months. … …
12th June 2018
Consumer price inflation is likely to have accelerated in May, due in large part to a rise in fuel inflation. Core inflation will also have remained elevated, and this is likely to be the case for some time. We think that this will ultimately prompt the …
7th June 2018
