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During his three years in office, Prime Minister Modi has taken a more incremental approach to economic policymaking than many had hoped for. This is likely to set the tone for the coming years. Small steps addressing the major constraints to faster …
1st June 2017
The slowdown in growth in the Q1 GDP data for India released today doesn’t quite tally with other evidence which has tended to suggest that growth stabilised or picked up last quarter. It is presumably linked to the disruption caused by demonetisation …
31st May 2017
The recovery in India’s exports over the past few months is due in large part (and somewhat surprisingly) to a rise in global oil prices as well as the strength of the rupee, which has boosted earnings in dollar terms. But these factors are unlikely to …
The consensus reached between India’s national and state governments on how different products will be dealt with under the Goods and Services Tax (GST) marks another important step towards its implementation. The finance ministry on Friday confirmed both …
23rd May 2017
Indian equities have rallied over the past few months, with the benchmark Sensex stock index hitting a fresh all-time high in mid-May. This reflects in part a broader pick-up across most major EM equity markets, but local factors including the BJP’s …
22nd May 2017
New powers granted to the Reserve Bank of India (RBI) could in theory speed up resolution of cases of stressed assets that have burdened the banking sector in recent years. But the measures are likely to have limitations. The big picture is that the …
17th May 2017
India’s monthly trade deficit widened to its highest level in over two years in April. But this was in large part due to temporary factors. Looking ahead, with imports of key commodities such as gold and oil likely to stay in check, the overall trade …
16th May 2017
The revisions and rebasing of India’s wholesale price and industrial production data align them with other indicators used in India and make them more useful for international comparisons. But while the new wholesale price index appears an improvement, …
15th May 2017
April’s sharp fall in consumer price inflation makes the rate hike we’ve been arguing would occur before the end of the year seem less likely. But we suspect the drop in inflation will be reversed before long. Meanwhile, the revamped industrial output …
12th May 2017
Recent measures to further ease restrictions on foreign direct investment into India should help to build on one of the main policy successes of the Modi government so far. But the government may now have picked all of the low-hanging fruit, and further …
11th May 2017
Consumer price inflation is likely to have eased a touch in April, due in large part to a drop in fuel inflation. But this is likely to prove temporary. Further ahead, rising core price pressures could prompt the RBI to follow up last month’s hike of the …
5th May 2017
India’s manufacturing PMI held steady at a multi-month high in April, supporting our view that the economy is on a firmer footing after the hit to activity from demonetisation. Looking ahead, manufacturers should continue to recover over the near term, …
2nd May 2017
The release of an Indian Meteorological Department (IMD) forecast of a “normal” monsoon this year has led to a rush of commentary on the potential economic impact. But the early forecasts are prone to revision and, in any case, the monsoon matters less to …
27th April 2017
Indian equities have rallied over the past few months, with the benchmark Sensex stock index hitting an all-time high in early April. This reflects in part a broader pick-up across most major EM equity markets, but local factors including the BJP’s recent …
25th April 2017
The rally in the Indian rupee since the start of 2017 has continued in recent weeks, driving the currency to its highest rate against the US dollar in almost two years. While we doubt that the rally will continue much longer, we do still expect the rupee …
21st April 2017
The recent approval of a bailout package for indebted farmers in Uttar Pradesh fulfils an election pledge from the BJP, but should also raise concern. The unconditional debt write-off could set a political precedent in other states that would have a …
19th April 2017
The jump in gold imports over the past couple of months is likely to have been boosted by temporary factors, including a rebound in purchases following demonetisation and greater consumer demand ahead of religious festivals in April. Gold imports now seem …
18th April 2017
Indian wholesale price inflation edged down in March, but the bigger picture is that it remains close to its highest rate in three years, and that price pressures are still elevated. … Wholesale Prices …
17th April 2017
Consumer price inflation rose again in March, due in large part to a rise in fuel inflation. Further ahead, rising core price pressures could prompt the RBI to follow up last week’s hike to the reverse repo rate with a raising of the benchmark repo rate …
12th April 2017
Remittance inflows are an important source of external funding for India, and were equivalent to more than 3% of GDP in 2016 – almost twice as large as net capital inflows. Though there are some risks, remittance inflows look set to remain strong over the …
11th April 2017
Consumer price inflation is likely to have risen again in March, due in large part to another acceleration in food inflation. Further ahead, rising core price pressures could prompt the RBI to follow up yesterday’s hike to the reverse repo rate with a …
7th April 2017
The Reserve Bank of India (RBI) opted to keep its benchmark repo rate on hold today, but the hike to the reverse repo rate represents a shift towards tighter monetary policy. Looking ahead, with inflation set to accelerate further, we think that hikes to …
6th April 2017
The rise in India’s manufacturing PMI in March is another sign that the economy is on a firmer footing after the hit to activity from demonetisation. Looking ahead, manufacturers should continue to recover over the near term, but the sector still faces …
3rd April 2017
Slow progress in liberalising India’s rigid labour market has been one of the biggest disappointments of PM Modi’s term in office so far. However, there are signs of improvement at state level, most notably in Rajasthan. While it wouldn’t be easy, the …
31st March 2017
The passage of key legislation through the Lok Sabha marks another important step towards implementation of the Goods and Services Tax (GST). The legislation also provides greater clarity on the exact form the GST will take. While it isn’t perfect, it …
30th March 2017
In light of the Reserve Bank of India (RBI) signalling the end of the loosening cycle in its most recent policy meeting in February, most analysts are now expecting the central bank to keep rates on prolonged hold, including in next week’s announcement. …
28th March 2017
While there was a slight widening in India’s current account deficit in Q4, the more important point is that the external shortfall remains small. Given also that FDI inflows remain strong, the economy looks well placed to cope in the event of another …
24th March 2017
The latest economic data for India suggest that the most acute impact from the government’s demonetisation measures has now passed. Both the manufacturing and services PMI readings for February came in above 50 for the first time since the demonetisation …
23rd March 2017
Indian equities have rallied over the past few months, and the Sensex is now within touching distance of its all-time high. This reflects in part a broader pick-up across most major EM equity markets, but local factors including the BJP’s recent success …
22nd March 2017
India’s monthly trade deficit narrowed to a six-month low in February. Looking ahead, with imports of key commodities such as gold and oil likely to stay subdued by past standards, the trade deficit should remain at a comfortable level. … Trade position …
16th March 2017
The creation of a “bad bank” in India would help restructure the loans of India’s most heavily-indebted firms and should facilitate a clean-up of the balance sheets of commercial banks. But the banking sector is likely to continue struggling in the …
15th March 2017
Consumer price inflation accelerated in February for the first time since demonetisation due mainly to a rebound in food inflation. Looking ahead, rising price pressures could prompt the RBI to hike interest rates much sooner than most expect. … Consumer …
14th March 2017
The rise in Indian wholesale price inflation in February to its highest rate in over three years supports our view that the Reserve Bank of India will have to reverse course and begin hiking interest rates much sooner than is generally anticipated. … …
The landslide victory for Prime Minister Modi and the BJP in the Uttar Pradesh state assembly election suggests that political goodwill towards the ruling national party remains intact, and boosts prospects for economic reform. That said, it remains to be …
13th March 2017
We wouldn’t make too much of January’s rebound in industrial production. This is, after all, a volatile series. But it supports other evidence that the impact of demonetisation has started to wane. … Industrial Production …
10th March 2017
Consumer price inflation is likely to have risen in February for the first time since demonetisation, due to a pick-up in food inflation. Looking ahead, rising core inflation could prompt the RBI to hike rates much sooner than most are expecting. … …
8th March 2017
The idea of a Universal Basic Income (UBI) in India has gained attention in recent weeks. While a UBI could go a long way towards eradicating poverty and reducing the problems with the current welfare system, its high fiscal cost and a lack of necessary …
6th March 2017
The government’s demonetisation measures have caused growth in India to slow but the economy is set to recover as consumption and investment rebound. Longer-term prospects have also been boosted as Prime Minister Modi’s reform agenda has gained momentum. …
2nd March 2017
The rise in India’s manufacturing PMI in February is another sign that the most severe impact on activity from demonetisation has passed. Looking ahead, manufacturers should continue to recover over the near term, but the sector still faces bigger …
1st March 2017
Official GDP data showing only a gradual slowdown in Indian growth in Q4 is hard to square with other more reliable monthly data which show activity slowed sharply towards the end of last year following the introduction of demonetisation in November. … …
28th February 2017
The raft of state elections currently taking place in India is likely to have an important bearing on economic policy at the local level. But more significant, the outcome of the state elections – in particular the vote in Uttar Pradesh – could be crucial …
23rd February 2017
The Reserve Bank of India’s decision to keep rates on hold and signal the end of its loosening cycle in this month’s policy meeting took many by surprise. But subsequent data showing that core inflation has risen to its highest rate since October 2014 …
22nd February 2017
Indian bond yields have risen since the Reserve Bank of India surprised markets in early February by keeping rates on hold and signalling the end of its loosening cycle. Looking ahead, yields are likely to rise further if, as we expect, the central bank …
20th February 2017
Trade data for January show that export values continued to recover last month. Looking ahead, export growth should remain positive, but the government’s long-term target still looks out of reach. Data released yesterday evening show that the monthly …
16th February 2017
The sharp rise in Indian wholesale price inflation last month supports our view that the Reserve Bank of India will have to reverse course and begin hiking interest rates much sooner than is generally anticipated. … Wholesale Prices …
14th February 2017
Consumer price inflation dropped in January as price discounting continued following demonetisation. But inflationary pressures are set to build over the coming months, and we continue to believe that the RBI will have to tighten policy sooner than most …
13th February 2017
Industrial production growth turned negative again in December. Demonetisation probably played a role in the slowdown, but it is also the case that November’s faster growth was mostly due to one-off factors. Today’s weaker data are a better gauge of the …
10th February 2017
Consumer price inflation is likely to have edged down in January as price discounting continued following demonetisation. But further ahead, price pressures are set to build. This was acknowledged by the RBI in yesterday’s policy announcement, as the …
9th February 2017
The Reserve Bank of India’s (RBI’s) decision to keep interest rates on hold today was in line with our non-consensus forecast and it signals the end of the loosening cycle. Looking ahead, with inflation set to accelerate, we continue to think that rate …
8th February 2017
Financial markets and a large majority of analysts are braced for a rate cut at the Reserve Bank of India (RBI) policy meeting next week. But, despite the continued damage and uncertainty caused by demonetisation, we don’t think it’s a done deal. The RBI …
3rd February 2017
