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Prime Minister Modi and the BJP face an uphill battle in their attempts to win the ongoing election in the state of Bihar. From an economic perspective, the Bihar vote is important for two key reasons. First, Bihar is one of India’s most populous, and …
21st October 2015
After struggling for most of this year, Indian equities have rallied so far in October. Looking ahead, with valuations not looking particularly stretched, we expect equities to post further gains over the next couple of years. … Equities regain their …
20th October 2015
The narrowing in India’s trade deficit in September masks that fact that exports continue to contract sharply. Wide-ranging reform is needed to boost export prospects but, with progress still slow, the government’s ambitions to nearly double export values …
16th October 2015
A bailout for India’s heavily-indebted electricity providers would be a positive step, but there are reasons to doubt the effectiveness of any rescue deal. For a start, any package is likely to be small given the Finance Ministry’s commitment to fiscal …
15th October 2015
Wholesale price inflation rose in September after falling a record low in August. Looking ahead, we think that WPI inflation will accelerate further over the coming months as the favourable base effects that have helped to keep down food and fuel …
14th October 2015
Having cut the repo rate by 125bp this year, the RBI has shifted its focus to ensuring that banks pass on these rate reductions to borrowers. In truth, high levels of bad debt mean that the banking system needs large-scale capital injections and arguably …
13th October 2015
Indian consumer price inflation rose in September. Looking ahead, while theRBI’s inflation target for January 2016 isn’t under threat, meeting the medium term target will be difficult. Given this, we think that the window forfurther interest rate cuts has …
12th October 2015
Inflation is likely to have accelerated in September, due in large part to the unwindingof the favourable base effects that helped anchor food inflation in July and August.What’s more, inflation expectations have picked up amid concerns over a …
7th October 2015
The fall in India’s manufacturing PMI reading in September highlights the fact that, despite recent signs of a recovery in activity, local industry continues to face significant headwinds. … Manufacturing PMI …
1st October 2015
The Finance Ministry’s combative approach to some key issues, including the retrospective taxation of foreign companies and the potential composition of the proposed monetary policy committee, has raised concerns over the past few months. But an apparent …
30th September 2015
The Reserve Bank of India’s (RBI’s) decision to cut the repo rate by 50bp today, to 6.75%, went beyond what most had expected. But having stated that its attention will now turn to its medium-term inflation target, we think that there is little scope for …
29th September 2015
With recent activity data weak and inflation low, the consensus has swung around to our long-held view that the Reserve Bank of India will cut interest rates again this year, with the upcoming meeting on 29th September now looking the most likely venue. …
24th September 2015
India’s Finance Ministry continues to tread on dangerous ground by becoming increasingly vocal in its calls for further monetary easing. Most recently in an interview over the weekend, Finance Minister Arun Jaitley stated that “common sense says that …
22nd September 2015
The weakness of inflation over the past couple of months, combined with the inaction of the US Fed, has prompted India’s financial markets to raise expectations of another cut in interest rates next week. Most notably, local two-year bond yields have …
21st September 2015
Measures taken by the government to encourage foreign direct investment into India are showing signs of success. Net FDI inflows rose last quarter to their highest level as a share of GDP since Q4 2009. Wider-ranging reform would provide a further boost …
17th September 2015
India’s increasingly decentralised system means that state elections such as the upcoming vote in Bihar have a bearing on economic policy. Perhaps more significant, the need to campaign at the local level can make a national ruling party reluctant to …
16th September 2015
The weakness of consumer price inflation in August should be the clinching factor in determining whether or not the Reserve Bank cuts interest rates at its meeting later this month. … Consumer Prices …
14th September 2015
The rise in India’s current account deficit in Q2 was due in large part to seasonal patterns. The important point from a wider perspective is that the deficit remains small. This, combined with the fact that FDI inflows have picked up, means that there is …
Wholesale price inflation dropped sharply in August to its lowest rate since the series began. The WPI rate may not have as much of a bearing on policymaking as the CPI rate, but the fact that it has plummeted again is unlikely to be ignored. This …
India’s industrial production outperformed most expectations in July but there remainsignificant headwinds to a sustained recovery. … Industrial Production …
11th September 2015
The long-awaited implementation of the Goods and Services Tax (GST) in India could bring significant benefits to the economy. But a decade after it was first proposed, there are still a number of sticking points preventing its introduction. In truth, not …
9th September 2015
Inflation is likely to have edged down in August, due in large part to favourable base effects caused by the spike in food prices a year ago. But these effects are soon likely to fade, which will push up headline inflation over the coming months. And with …
8th September 2015
The rapid expansion of the government deficit in the early part of this fiscal year has led to some concerns about the Finance Ministry’s ability to meet its budgeted target. These concerns are probably overdone but, in any case, a slightly looser fiscal …
4th September 2015
The raft of comments and media reports arguing that India is set to become the new engine of global growth following the recent struggles in China were given more fuel earlier this week with the release of GDP data showing that India grew as fast as China …
3rd September 2015
India’s manufacturing PMI edged down in August, highlighting that conditions are still subdued by past standards. Looking ahead, with progress on creating a favourable business environment remaining slow, a sustained pick-up in manufacturing output seems …
1st September 2015
At face value, today’s GDP figures for Q2 suggest that India matched China as the world's fastest-growing major economy last quarter. But the GDP data remain inconsistent with numerous other indicators which suggest that, at best, the economy is in the …
31st August 2015
The UN’s projection that India will become the world’s most populous nation as soon as 2022 has refocused attention on the country’s remarkable demographic potential and the impact this could have on its economic development. The key challenge for India’s …
27th August 2015
India’s Finance Ministry is treading on dangerous ground with calls for monetary easing and other moves that could put the central bank’s independence at risk. Any loss of credibility for the RBI could jeopardise its efforts to lower inflation, one of the …
25th August 2015
The monsoon session of parliament, which concluded last week, has ended up being one of the biggest disappointments of Prime Minister Modi’s tenure so far, with virtually no progress made on pushing through needed economic reforms. Admittedly, the failure …
21st August 2015
The Indian rupee has depreciated against the US dollar so far in August to its weakest level since the 2013 "taper tantrum". But unlike two years ago, we see little reason for policymakers to panic. … Rupee drops to two-year …
20th August 2015
The sharp slowdown in bank lending to the private sector over the past four years appears to have bottomed out, as cuts to policy rates gradually feed through to commercial banks’ lending rates. But continued concerns over the quality of existing loans …
18th August 2015
Wholesale price inflation dropped sharply in July to its lowest rate since the series began. This substantially increases the chance of the Reserve Bank of India cutting interest rates in another unscheduled meeting over the coming weeks. … Wholesale …
14th August 2015
The ruling BJP's efforts to push through important economic reforms in the monsoon session of parliament, which finishes today, have been largely unsuccessful. Looking ahead, with attention soon likely to turn to the flurry of major state elections taking …
13th August 2015
The sharp drop in Indian inflation in July was due in large part to favourable base effects, and is therefore unlikely to have much bearing on upcoming policy decisions. The Reserve Bank has stated that it will be focusing more on the impact of a …
12th August 2015
The rupee has depreciated to its weakest level since the 2013 "taper tantrum" this morning, but we don't think that this will cause panic among policymakers. Since the start of the year, the rupee has outperformed most other major EM currencies. What's …
Large base effects are likely to have dragged down inflation in July. The Reserve Bank has stated that it will be looking through base effects over the coming months when making policy decisions, instead focussing on the impact of a potentially weak …
6th August 2015
The Reserve Bank of India's decision to keep interest rates on hold today does not signal the end of the current loosening cycle. We are forecasting one more 25bp cut in this cycle, which would bring the repo rate down to 7.00% by end-2015. … RBI's …
4th August 2015
India’s manufacturing PMI increased in July, but conditions are still subdued by past standards. Looking ahead, with progress on creating a favourable business environment remaining slow, a sustained pick-up in manufacturing output seems unlikely. … …
3rd August 2015
The slump in India’s exports over the past few months has been caused in part by the sharp fall in global oil prices and the relative strength of the US dollar, two trends that are unlikely to be reversed any time soon. New sources of export growth are …
31st July 2015
The draft version of the government’s Financial Code, released last week, could have important implications for the functioning of the Reserve Bank of India (RBI). The adoption of a voting monetary policy committee would be a positive step. However, there …
30th July 2015
The recent weakness of the rupee, which has fallen by more than 1.5% against the US dollar in the past couple of weeks, is unlikely to worry policymakers. For a start, the fall in the rupee is a reflection of the general strength of the US dollar. The …
28th July 2015
The alternative economic indicators that the Reserve Bank of India is now putting more weight on to assess the health of the economy still point to weakness. They will convince policymakers, we think, of the need for another rate cut. … Activity weak …
23rd July 2015
India’s financial markets have outperfomed their emerging market peers over the past few weeks. In contrast to other EM currencies, the rupee has held up well. At the same time, India’s equity markets have strengthened. … Financial markets outperform EM …
21st July 2015
The prospects of “Grexit” and interest rate hikes in the US have cast a spotlight on the potential for shifts in capital flows to destabilise emerging markets such as India. One factor that often gets overlooked is the role of overseas remittances. …
16th July 2015
Wholesale price inflation was broadly unchanged in June, remaining firmly in negative territory and close to its lowest rate since the series began. Importantly, core inflation fell further, pointing to continued slack in the economy. … Wholesale …
14th July 2015
June’s rise in consumer price inflation was primarily the result of a sharp fall in food prices a year ago rather than any recent increase in inflation pressures. It should not put the Reserve Bank under pressure to reverse course. … Consumer Prices …
13th July 2015
The weakening of India’s industrial production in May reinforces our view that, despite recent signs of recovery, the sector continues to face significant headwinds. … Industrial Production …
10th July 2015
There are signs that the government’s plans to ramp up public investment over the coming years are bearing fruit. However, it is early days and, looking ahead, fully implementing the plans will be a tough challenge. Potential impediments include another …
8th July 2015
Inflation is likely to have picked up in June. The knee-jerk response may be to link it to the monsoon, but the rise in headline inflation is due more to the collapse in food prices a year ago. Looking ahead, the relatively small increase in minimum …
7th July 2015
Indian markets have been stable over the past few days, even in comparison to the muted reaction in global market to events in Greece. Looking ahead, even if the worsening situation there causes contagion to take hold, the improvement in India's external …
2nd July 2015
