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The Reserve Bank of India (RBI) has started to put to use its new powers to clean up the banking sector. Earlier this month it instructed several commercial banks to begin insolvency proceedings against the biggest corporate defaulters. On some estimates, …
22nd June 2017
The surge in Indian equities over the past few months has continued in June, with the benchmark Sensex stock index closing at a fresh all-time high on the 19th. The rally reflects in part a broader pick-up across most major EM equity markets, but local …
20th June 2017
India’s monthly trade deficit widened to its highest level in two and a half years in May, but we don’t think this is much of a concern. With imports of key commodities such as oil likely to stay in check, the overall trade deficit should still remain at …
19th June 2017
There was a slight widening in India’s current account deficit in Q1, 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 the event of another …
16th June 2017
The drop in headline Indian wholesale price inflation in May will increase the clamour for rate cuts. But stripping out the effect of volatile fuel and food prices, our measure of core WPI inflation actually edged up last month. With reasons to think that …
14th June 2017
The announcement over the weekend of a debt write-off for farmers in Maharashtra extends the precedent set in Uttar Pradesh in April. Other states may now follow, at a significant fiscal cost. … Loan waivers are setting a dangerous …
13th June 2017
The sharp drop in Indian consumer price inflation in May is likely to raise further questions about the RBI’s reluctance to loosen policy. But we think the central bank’s unwillingness to cut rates is justified. Inflation is close to bottoming out, and is …
12th June 2017
The Indian government is treading on dangerous ground with calls for monetary easing and other 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 …
Renewed talk of the government ramping up its privatisation drive is welcome, but its aim of raising INR725bn through asset sales of various state-owned companies this year still looks unrealistic. In response, rather than allowing the budget position to …
9th June 2017
Consumer price inflation is likely to have eased in May due in large part to another drop in food inflation, and we have nudged down our full-year inflation forecast in response to the weakness in the first few months of 2017. But the more important point …
8th June 2017
The Reserve Bank of India (RBI) opted to keep policy unchanged today despite the weakness of the latest inflation and GDP data. However, the less hawkish tone of the policy statement suggests that rate hikes may not come onto the agenda until next year. … …
7th June 2017
The weakness of the latest GDP and inflation data has reignited talk that the Reserve Bank of India (RBI) may loosen at the upcoming policy meeting on 7th June. However, more timely indicators suggest that there has been a big improvement in activity …
2nd June 2017
May’s PMI reading suggests that India’s manufacturing sector weakened a touch last month, but remained in relatively good shape following demonetisation. … Manufacturing PMI …
1st June 2017
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 …
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
