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Headline wholesale price inflation edged down in December. But stripping out the effect of volatile fuel and food prices, our measure of core WPI inflation rose last month. With reasons to think that core price pressures will rise further over the coming …
15th January 2018
The latest acceleration in consumer price inflation underlines our view that markets have been underestimating the likelihood of policy rate hikes in India this year. … Consumer Prices (Dec.) & Industrial Production …
12th January 2018
Historically, a low level of foreign investment has been one factor constraining the productive potential of India’s economy. The Modi government has made some progress in addressing this. But FDI inflows to India are still relatively low by EM standards, …
11th January 2018
High global oil prices have in the past contributed to worryingly-large current account deficits in India but prices would have to rise much higher than they have recently for that to return as a risk. A more immediate concern is that further global oil …
10th January 2018
We think that consumer price inflation rose again in December, due to an acceleration in both food and fuel inflation. Core price pressures are also continuing to build, which could prompt the Reserve Bank to shift the policy debate to tightening later …
5th January 2018
India’s manufacturing PMI rose again in December. The reading is now at its highest since December 2012, and prospects for local manufacturers look bright over the near term. … Manufacturing PMI …
2nd January 2018
The minutes of the Reserve Bank of India’s (RBI’s) December policy meeting show that most MPC members are concerned about recent fiscal developments and the inflation outlook. Indeed, with consumer price inflation rising to a 15-month high in November and …
21st December 2017
In our final Watch of this year, we outline the prospects for India’s economy in 2018. We expect growth to accelerate, due to a pick-up in private consumption as well as looser fiscal policy. However, inflation is also likely to continue rising, which …
19th December 2017
The state election victories for Prime Minister Modi’s BJP in both Gujarat and Himachal Pradesh ensure that the ruling party remains firmly on track to secure a majority in the Rajya Sabha (upper house of parliament) in the not-too-distant future. They …
After reaching a three-year high in October, India’s trade deficit narrowed a touch in November. The shortfall is likely to narrow further over the coming months. Exports should continue to rebound following disruptions related to the GST, while commodity …
18th December 2017
Wholesale price inflation rose to an eight-month high in November. Policymakers put less weight on the WPI measure, but it nevertheless supports our view that the debate will shift towards monetary tightening later next year. … Wholesale Prices …
14th December 2017
There was a slight widening in India’s current account deficit in Q3 over a four-quarter sum, but the bigger picture is that the external shortfall remains small. In addition, FDI inflows remain strong. Given this, the economy looks well placed to cope in …
Indian financial markets have had a mixed year in 2017. Equities have surged and the rupee has strengthened a touch, but bonds have sold off. Looking ahead to 2018, we think that equities are unlikely to make many further gains, while the currency and …
13th December 2017
Indian consumer price inflation accelerated to a 15-month high in November, and looks set to rise further over the coming months. Monetary policy is likely to stay on hold in the very near term, but we think that the debate will shift towards tightening …
12th December 2017
The recapitalisation package recently announced by the government is the most significant measure yet to tidy up India’s beleaguered banking system and should all but enable India’s banks to meet global capital requirements over the coming years. Further …
11th December 2017
We think that consumer price inflation rose again in November, due to an acceleration in both food and fuel inflation. With core price pressures also continuing to build, the Reserve Bank may have to shift the policy debate to tightening in 2018. … Rise …
8th December 2017
The RBI kept its repo rate on hold at 6.00% today, defying calls from prominent members of the government for further rate cuts. In fact, with core price pressures building, we think the debate may shift towards tighter policy later in 2018. … RBI on …
6th December 2017
India’s manufacturing PMI rose significantly in November, following the trend across much of Asia. The reading is now at its highest in over a year, and prospects for local manufacturers look relatively bright over the near term. … Manufacturing PMI …
1st December 2017
Rumours that members of the government are attempting to pressure the Reserve Bank of India (RBI) to loosen monetary policy are nothing new, although continued efforts to undermine the central bank’s independence are worrying. For its part, the RBI under …
Today’s national accounts data show that GDP growth accelerated in Q3, arresting a slide of five consecutive quarters. Elements of today’s data are hard to square with evidence from other indicators. But the broad trajectory of a pick-up in growth seems …
30th November 2017
The development of a corporate bond market in India could reduce local firms’ heavy reliance on bank loans to obtain funding and improve the pricing of risk, which would have knock-on benefits for the banking sector. The authorities have introduced …
The surge in Indian equities since the start of the year has continued over the past month, with the benchmark Sensex stock index hitting an all-time high in early November. The latest leg up has been driven primarily by financial stocks following the …
22nd November 2017
Indian markets appear to have taken last week’s ratings upgrade from Moody’s in their stride, with the rupee recording only very small gains against the US dollar and the 10-year bond yield staying close to its highest level in over a year. Looking ahead, …
20th November 2017
Moody’s has highlighted a number of genuine positive recent developments in India as justifications for a ratings upgrade – though its inclusion of demonetisation among them should raise some eyebrows. However it appears to have ignored entirely the loan …
17th November 2017
India’s trade deficit widened to a three-year high in October, but we don’t think this is cause for major concern. Exports should rebound following disruptions related to the GST, while commodity imports are unlikely to rise much further. … Trade deficit …
15th November 2017
Much like the consumer price inflation data released yesterday, wholesale price inflation came in above expectations in October. Policymakers put less weight on the WPI measure, but any lingering chance of a rate cut next month has diminished even …
14th November 2017
Indian consumer price inflation accelerated in October, and looks set to rise further over the coming months. As such, there is no scope for further monetary loosening. … Consumer Prices …
13th November 2017
Indian industrial production growth slowed a touch but remained healthy in September, providing further evidence that the disruption caused by the introduction of the Goods and Services Tax (GST) at the start of Q3 was short-lived. … Industrial Production …
10th November 2017
We think that consumer price inflation held steady in October as a slight rise in food inflation was offset by a drop in fuel inflation. But with core price pressures building, inflation is likely to resume accelerating over the coming months. Given this, …
8th November 2017
A year after the Indian government’s surprise announcement that the bulk of the country’s bank notes were being cancelled, it is clear that the negative impact on incomes and output was substantial – though temporary – while the hoped-for benefits failed …
6th November 2017
In India’s decentralised political system, state elections such as the upcoming votes in Himachal Pradesh and Gujarat can have a direct bearing on economic policy. Arguably more significant though, a convincing performance for the BJP, particularly in …
3rd November 2017
India’s manufacturing PMI slipped in October, following the trend across most of Asia. However, we doubt that this marks the start of a sharp downturn. In fact, over the near term at least, prospects for local manufacturers are relatively bright. … …
1st November 2017
The bank recapitalisation package unveiled last week and the rise in India’s ranking in the World Bank Ease of Doing Business survey announced today have bolstered Mr Modi’s reform credentials. But the bigger picture remains that progress on tackling the …
31st October 2017
A recent study from a government-appointed working group has reignited the debate over whether India should switch to a producer price index (PPI) to measure inflation at the early stages of the supply chain, from its current use of a wholesale price …
26th October 2017
A large-scale recapitalisation plan announced yesterday by the government is the most significant measure yet to deal with India’s banking sector malaise. That said, the package will come at a fiscal cost, and the extent of its success will hinge on …
25th October 2017
The rapid expansion of the central government’s deficit in the early stages of the fiscal year is a regular occurrence, as revenues tend to get ramped up in latter months. Nevertheless, there are several reasons to think that the deficit will exceed the …
24th October 2017
The Indian rupee has depreciated over the past few weeks, and recently dropped to a six-month low against the US dollar. Looking ahead, the currency could weaken a little more. But India’s reasonably strong external position means that any further …
23rd October 2017
The minutes of the Reserve Bank of India’s (RBI’s) October policy meeting reveal that most members expressed caution about recent fiscal developments and the inflation outlook. Indeed, with inflation data for September showing a further rise in core price …
19th October 2017
Wholesale price inflation unexpectedly eased in September. But stripping out the effect of volatile fuel and food prices, our measure of core WPI inflation accelerated further last month. With reasons to think that core price pressures will rise further …
16th October 2017
India’s trade deficit narrowed to a seven-month low in September. Looking ahead, there are several reasons to think that it will stay in check over the coming months. This should keep India’s financial markets relatively secure in the event that sentiment …
While headline consumer price inflation was unchanged last month, core inflation rose again. Policymakers will put less weight on the erratic industrial production data that were also released today but, for what they are worth, they signal that output …
12th October 2017
Announcements of debt write-offs for farmers in a number of Indian states in recent months have grabbed the headlines. In this Update, we attempt to calculate the fiscal cost of the announced waivers, and outline scenarios if other states were to follow …
A number of recent tweaks to the new Goods and Services Tax (GST) appear to be attempts to shore up support for the BJP ahead of the upcoming state in election in Gujarat rather than attempts to improve the tax system. This willingness to use the GST as a …
11th October 2017
Consumer price inflation is likely to have accelerated further in September, due in large part to another rise in vegetable price inflation. Core price pressures are also building, meaning there is no scope for further policy loosening. … Core price …
6th October 2017
The Reserve Bank of India (RBI) went with consensus expectations by keeping its repo rate on hold at 6.00% today. It also acknowledged the growing upside risks to the inflation outlook. As such, renewed policy loosening is unlikely. … RBI holds rates, …
4th October 2017
India’s manufacturing PMI reading held steady in September, providing further evidence that the disruption caused by the introduction of the Goods and Services Tax (GST) at the start of Q3 was short-lived. … Manufacturing PMI …
3rd October 2017
Prime Minister Narendra Modi’s announcement of a new project aimed at “electrifying” all of India’s households by the end of 2018 has grabbed headlines this month. But even if this ambitious target is achieved, the reality is that a large chunk of India’s …
29th September 2017
We are in agreement with financial market and analyst expectations of a rate hold in the Reserve Bank of India’s (RBI’s) upcoming policy meeting on 4th October. Further ahead, some are still expecting further, albeit modest, policy loosening. However, …
27th September 2017
Some have argued that the recent jump in inflation is all about a surge in volatile food prices, with the implication that it shouldn’t have a significant bearing on monetary policy. But this ignores the fact that underlying price pressures are rising …
21st September 2017
The strength of gold imports in recent months is the result of temporary issues related to the new GST rather than buoyant underlying demand. As these issues get resolved, we expect gold imports to ease, which should help to ensure that the overall …
20th September 2017
