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Recent hikes to import duties on various goods appear to be an attempt by Prime Minister Modi and the BJP to shore up popular support ahead of a clutch of state elections this year, and the general election in 2019. But while the moves may help some local …
23rd February 2018
Indian financial markets have not been able to escape the recent turmoil in global markets, with equities dropping sharply and the rupee weakening against the US dollar. Looking ahead, we expect further falls in equities. But we have revised our forecasts …
22nd February 2018
The minutes of the Reserve Bank of India’s (RBI’s) February policy meeting show that most MPC members are concerned about recent fiscal developments and the inflation outlook. Indeed, with core inflation now at multi-year highs and set to accelerate …
India’s monthly trade deficit widened to its highest level since the taper tantrum in January. But we don’t think this is reason to panic just yet. Exports should rebound following disruptions related to the GST, while commodity imports are unlikely to …
15th February 2018
Headline wholesale price inflation eased in January, 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, we remain of the view …
The slight easing of consumer price inflation in January was due to a decline in food and fuel inflation. Core inflation remained elevated and is set to rise further. We remain comfortable with our non-consensus view that policy rate hikes are likely this …
12th February 2018
Consumer price inflation is likely to have accelerated again in January, due to another rise in food inflation. But core price pressures are also continuing to build. This was acknowledged by the RBI earlier this week as the statement accompanying its …
8th February 2018
The RBI’s decision to hold its repo rate at 6.00% today came as no surprise but it sounded notably more hawkish in the policy statement. This supports our non-consensus view that rate hikes are likely later this year. … RBI turns more …
7th February 2018
We are in agreement with financial market and analyst expectations that rates will be left on hold at the upcoming policy meeting of the Reserve Bank of India (RBI) on Wednesday 7th February. However, while most are also expecting rates to remain on hold …
2nd February 2018
The finance ministry faced a tricky balancing act in today’s budget announcement for FY18/19 as it aimed to shore up popular support ahead of a busy 18 months of elections while also demonstrating continued commitment to fiscal prudence. Given this, it is …
1st February 2018
India’s manufacturing PMI slipped in January from December’s five-year high. But the reading is still strong, and prospects for local manufacturers look relatively bright over the near term. … Manufacturing PMI …
A key theme running through the government’s latest Economic Survey is the growing numbers of workers and firms being brought into the formal economy, and so subject to taxation and closer regulatory oversight. The immediate benefits should not be …
30th January 2018
The finance ministry faces a delicate balancing act in the upcoming union budget for FY18/19, which will be unveiled on 1st February. On the one hand, it will be under pressure to loosen policy ahead of upcoming state elections and with the 2019 general …
26th January 2018
The latest data suggest that India’s industrial sector has strengthened significantly in recent months, underlining that any disruption from the introduction of the GST in mid-2017 was short-lived. Industrial production growth rose to a two-year high of …
24th January 2018
Indian financial markets have had a mixed start to the year with equities surging, the rupee remaining stable against the US dollar, and bonds continuing to sell-off. Looking ahead, we think that equities are unlikely to make many further gains, while the …
22nd January 2018
India’s fiscal deficit has overshot the central government target so far in FY17/18. This doesn’t necessarily signal that the target will be missed – revenues tend to get ramped up in the final months of the fiscal year. Even so, there are a number of …
19th January 2018
India’s trade deficit widened to a three-year high in December, but we don’t think this is cause for major concern just yet. Exports should rebound following disruptions related to the GST, while commodity imports are unlikely to rise much further. … Time …
16th January 2018
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
