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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
The finance ministry faced a delicate balancing act in today’s budget announcement for FY17/18 as it aimed to boost demand while also demonstrating its commitment to fiscal prudence. Given this, it is no surprise that it has opted to slow the pace of …
1st February 2017
The rise in India’s manufacturing PMI in January is an early sign that the worst of the impact on activity from demonetisation may be over. Looking ahead, local manufacturers should gradually recover from demonetisation over the coming months, but the …
The finance ministry faces a delicate balancing act in the upcoming union budget for FY17/18, which will be unveiled on 1st February. On the one hand, it will be aiming to boost demand following demonetisation and in light of upcoming state elections. On …
26th January 2017
Upcoming state elections in India are likely to have an important bearing on economic policy at the local level. But perhaps more significant, the outcome of the state elections could be crucial in determining whether Prime Minister Modi’s BJP will …
23rd January 2017
Financial markets in India have made a relatively bright start to 2017. The rupee and bond yields have been stable, while equities have rallied so far in January. Looking ahead however, prospects are mixed. There are reasons to think that the currency and …
19th January 2017
The government’s demonetisation measures have led to a jump in card and digital transactions, but this has not been anywhere near large enough to offset the slowdown in cash spending. That said, it seems unlikely that cashless payments will retreat to …
17th January 2017
Indian wholesale price inflation edged up in y/y terms last month, but dropped in m/m terms as price discounting continued to take place following demonetisation. Nevertheless, further ahead, demonetisation could push up inflation by leading to supply …
16th January 2017
India’s monthly trade deficit narrowed significantly in December, and a number of factors should ensure that it remains in check over the coming months. This should keep India’s financial markets relatively secure in the event that global investor …
Consumer price inflation dropped again in December as price discounting continued following demonetisation. A rate cut can’t be ruled out in the near term but, over the longer term, demonetisation could stoke inflationary pressure. We continue to believe …
12th January 2017
India’s government has moved to strip the legal status of banknotes affected by demonetisation that are still in circulation. This would have the result of extinguishing some of the RBI’s liabilities and open up the possibility of the RBI making a one-off …
9th January 2017
Consumer price inflation is likely to have edged down in December as price discounting continued following demonetisation. However, further ahead, demonetisation could push inflation up by leading to supply disruptions and boosting liquidity in the …
6th January 2017
India’s December PMIs for both the manufacturing and services sectors suggest that the government’s demonetisation measures have had a significant, but not catastrophic, impact on economic activity. … PMIs suggest sizeable but not devastating …
4th January 2017
In our first Watch of 2017, we outline the prospects for India’s economy over the coming 12 months. The government’s demonetisation measures will lead to some weakness at the beginning of the year, but we expect growth to recover due to a rebound in …
3rd January 2017
2016 will be remembered as the year that Prime Minister Modi finally began to deliver on promises of much-needed economic reform. However, with a number of state elections due to take place over the next 12 months, the Modi government will face a more …
21st December 2016
Financial markets in India have taken last week’s decision by the US Fed to hike interest rates for the first time in a year in their stride. A bigger test might come if the Fed now tightens more aggressively than markets are anticipating in 2017 and …
20th December 2016
Trade data for November show that export values continued to recover last month. Looking ahead, export growth should remain positive, but the government’s target of nearly doubling export values from FY14/15 levels by FY20/21 looks too ambitious. he …
16th December 2016
Indian wholesale price inflation eased only slightly last month, supporting the message from yesterday’s CPI numbers that, while demonetisation has affected prices, there is little indication that disruption to the economy has been as dramatic as many …
14th December 2016
The narrowing in India’s current account deficit over a four-quarter sum in Q3, along with another rise in net FDI inflows, leaves the economy looking well-placed to cope in the event of a renewed upsurge in global risk aversion over the coming months. … …
The drop in CPI inflation in November can be attributed to the government’s demonetisation measures, but today’s data don’t indicate that disruption to the economy has been as dramatic as some reports have suggested. A rate cut can’t be ruled out in the …
13th December 2016
Indian industrial production data for October suggest that the sector was struggling even prior to the government’s demonetisation measures. … Industrial Production …
9th December 2016
We think that consumer price inflation dropped in November as the government’s demonetisation measures are likely to have led to some price discounting. However, demonetisation could boost inflation over the longer term if it leads to supply disruptions …
Having previously shown that it was willing to prioritise growth even at the risk of missing targets for inflation, the RBI’s decision today to keep interest rates on hold despite the downside risks created by demonetisation comes as a surprise. … RBI …
7th December 2016
The liquidity-draining measures that were eventually introduced by the Reserve Bank of India (RBI) to deal with the rush of cash entering the banking system after the demonetisation announcement have led to suggestions that the central bank may now …
2nd December 2016
The drop in India’s manufacturing PMI reading in November reverses the strength from October. Looking ahead, local manufacturers are likely to struggle amid the fallout from the demonetisation measures, while the sector also faces bigger structural …
1st December 2016
Today’s release of another set of strong GDP data requires two major caveats. The first is that the national accounts figures remain difficult to align with other indicators showing that activity is subdued by past standards. The second is that attention …
30th November 2016
Markets largely shrugged off the recent fall in the rupee to a record low against the US dollar, and were right to do so. With other EM currencies also weakening and inflation higher in India than elsewhere, the rupee still looks strong on broader …
India is often heralded for demonstrating a new path to middle income by focusing on the development of its services sector rather than on significant industrialisation. It is true that India’s services sector has grown more rapidly than in most other …
28th November 2016
The government’s shock demonetisation announcement earlier this month was its boldest measure yet to tackle corruption and formalise large parts of the shadow economy, but it is unlikely to be the last. … Anti-corruption drive has further to …
24th November 2016
The government’s surprise demonetisation announcement has led to a sharp rise in bank deposits over the past couple of weeks. The rush of liquidity in the system has led to a fall in interbank rates, while commercial banks have stepped up their bond …
21st November 2016
Despite many anecdotal reports of turmoil in the wake of last week’s surprise demonetisation, and undoubted hardship for many, the early evidence suggests that the economic impact of the move has been surprising mild. This in turn implies that the fall in …
18th November 2016
Although the monthly trade deficit widened a touch in October, a number of factors should keep it in check over the coming months. This should keep India’s financial markets relatively secure in the event that global investor sentiment turns against …
15th November 2016
The further fall in India’s consumer price inflation last month, along with the likely shock to demand from the government’s withdrawal of most bank notes, is likely to increase the clamour for further rate cuts. But if the RBI pulls the trigger and …
Indian wholesale price inflation edged down in October, but we expect it to resume accelerating over the coming months. The big picture is that there is still little room for further policy loosening. … Wholesale Prices …
Industrial production data for September suggest that, in contrast to the upbeat message from the strong GDP data, Indian industry continues to struggle. … Industrial Production …
11th November 2016
The announcement late yesterday that India’s two largest denominations of banknotes have ceased to be legal tender with immediate effect is likely to weigh on economic activity in the near term, with sectors such as retail that are dependent on cash …
9th November 2016
Consumer price inflation is likely to have edged up in October, as the recent sharp slowdown in food inflation appears to have bottomed out. But with the central bank focused on supporting growth, the pick-up we are expecting won’t be large enough to …
7th November 2016
India’s manufacturing PMI rose in October to its highest reading in almost two years, with sentiment being boosted by progress on the reform front and the RBI’s surprise rate cut last month. Nevertheless, local manufacturers are still facing structural …
