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Wholesale price inflation held steady in February, but we think that it will return to positive territory over the next couple of months. … Wholesale Prices …
14th March 2016
Today’s industrial production data suggest that output has continued to contract at the start of this year. The continued struggles of industry cast a dark cloud over the Modi government’s efforts to revitalise the economy. … Industrial Production …
11th March 2016
The recent market turbulence 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. Remittance flows into India were twice as …
10th March 2016
Inflation is likely to have edged down in February as food price pressures have shown signs of abating. The chances of there being perhaps one more rate cut in the near term have risen, but this is because the FY16/17 budget adopted a tighter fiscal …
8th March 2016
Finance Minister Arun Jaitley’s budget on Monday was well received, with targets for further reductions in the deficit left unchanged and projected spending in key areas ramped up. But the plans are based on assumptions for revenue collection that look …
2nd March 2016
India's manufacturing PMI remained unchanged at a low level in February. The big picture is that local industry continues to face significant structural constraints. … Manufacturing PMI …
1st March 2016
At first glance, Finance Minister Arun Jaitley appears to have pulled off a difficult balancing act in today’s nbudget announcement. The tighter deficit targets have been left unchanged, while the budget plans include a rise in public sector salaries and …
29th February 2016
With markets and commentators focused on what will be unveiled in the FY16/17 budget on Monday, prospects for the rest of the current session of parliament have slipped under the radar. One of the more important issues is the proposed amendment to land …
26th February 2016
Prime Minister Narendra Modi's revamped “Make in India” programme aimed at turning the country into a global manufacturing and export powerhouse got off to a high-profile start during last week’s showcase in Mumbai. But the flagship initiative is still …
23rd February 2016
The Indian rupee has depreciated against the US dollar so far in 2016 to its weakest level since the 2013 "taper tantrum". But unlike three years ago, there is little reason for policymakers to panic. … Policymakers unfazed by rupee …
22nd February 2016
The key point of interest in the upcoming budget will be whether the finance ministry implements the large public sector pay rise that the 7 th Pay Commission recommended. We think it will and, with no obvious ways to either trim other forms of spending …
18th February 2016
Comments last week from RBI Governor Raghuram Rajan that local banks are in need of "deep surgery" has refocused attention on the ailing sector. Large-scale capital injections, increased private participation and a new bankruptcy code are all required to …
17th February 2016
India’s trade deficit narrowed at the start of 2016 as the continued slump in exports was more than offset by another collapse in imports. With a number of factors likely to keep commodity imports in check, the overall current account position is unlikely …
16th February 2016
Wholesale price inflation unexpectedly dropped in January but, looking ahead, it still looks set to return to positive territory in Q1. … Wholesale Prices …
15th February 2016
Today’s CPI data for January confirm that the Reserve Bank was successful in meeting its near-term inflation target but also highlight the difficult task the RBI faces in achieving its medium-term targets. We maintain our view that the window for further …
12th February 2016
The government’s two new schemes aimed at reducing gold imports have had mixed results in their early stages. The Gold Monetisation Scheme has attracted little interest, while the Sovereign Gold Bond Scheme has made a decent start. Further success for the …
11th February 2016
Today’s release of another set of strong GDP data alongside upward revisions to earlier quarters’ growth rates is more likely to deepen doubts about the quality of the official data than improve sentiment towards India’s economy. … GDP …
8th February 2016
Inflation is likely to have risen at the start of 2016 on account of a further small rise in food inflation. Looking ahead, the FY16/17 budget is likely to incorporate a significant rise in public sector wages, which would add to the RBI’s difficult task …
5th February 2016
The Reserve Bank of India (RBI) kept its repo rate on hold at 6.75% today and, while the consensus is expecting further modest loosening later this year, we think that rates will remain unchanged throughout 2016. … RBI holds rates, no change likely in …
2nd February 2016
India's manufacturing PMI rose at the start of 2016, but the reading remains weak by past standards. The big picture is that local industry continues to face significant structural headwinds. … Manufacturing PMI …
1st February 2016
As attention turns to the government’s FY16/17 budget announcement on 29 th February, the finance ministry can look back on what appears to have been a successful FY15/16. We think that this year’s fiscal target will be met, and there has been evidence of …
29th January 2016
The consensus is expecting further, albeit limited, monetary easing in India over the coming months, but we continue to think that the rate-cutting cycle has come to an end. The Reserve Bank of India’s (RBI’s) aversion to financial market volatility means …
27th January 2016
The past month has seen India's benchmark Sensex stock index drop to its lowest level since the inauguration of Prime Minister Modi in May 2014. The latest slump is linked to the global equity sell-off but it has coincided with a souring of hopes that …
22nd January 2016
India has not been spared the sell-off in EM financial markets since the start of the year. The rupee is now at its weakest rate against the US dollar since the currency crisis of September 2013, while equities have dropped to their lowest level since the …
21st January 2016
With only two months of this fiscal year remaining, the finance ministry’s aim of raising nearly INR700bn in revenues through the privatisation of various state-owned companies looks impossible to achieve. Suggestions that a lower target will be set for …
20th January 2016
India’s trade deficit remained in check in December but this positive headline story masks the fact that exports continue to contract sharply. With progress on the reforms needed to support a vibrant export sector still slow, the government’s ambition to …
18th January 2016
As India is one of the world’s largest net importers of oil, the continued slide in global oil prices should ensure that the improvement in the current account position is sustained. Domestically, the government, rather than consumers, stands to benefit …
15th January 2016
Wholesale price inflation picked up in December and, looking ahead, we think that it will rise further, returning to positive territory early this year. … Wholesale Prices …
14th January 2016
A recent pick-up in domestic production and a fall in imports of coal have led to suggestions that the government is on track to meet its target of doubling output by 2020. But the sector continues to face longer-term challenges that make the target look …
13th January 2016
India’s consumer price inflation accelerated in December. While this doesn’t put the RBI’s inflation target for January 2016 under threat, it does highlight the difficult task the RBI faces in meeting its medium-term targets. This bolsters our view that …
12th January 2016
Inflation is likely to have risen in December on account of accelerating food inflation and the government’s incremental hiking of fuel duties even as global oil prices continue to slump. Further ahead, a potentially large rise in public sector wages …
7th January 2016
In our first India Watch of 2016, we outline the prospects for India’s economy over the coming year. The lagged effect of earlier policy loosening and weakness in global commodity prices should provide a small boost to economic growth this year. However, …
6th January 2016
The slump in India’s manufacturing PMI reading in December highlights that, despite the recent strength of the hard activity data, local manufacturers continue to face significant structural headwinds. … Manufacturing PMI …
4th January 2016
On the face of it, 2015 has been a decent year for the Indian economy. Admittedly, activity indicators are pointing to a slow and bumpy recovery, but conditions have undoubtedly improved following three years of tepid economic growth. Meanwhile, inflation …
23rd December 2015
The widening in India’s current account deficit in Q3 was due in large part to seasonal patterns. Over a four-quarter sum, the deficit narrowed and, given also that FDI inflows remain strong, there is little reason to be concerned over India’s external …
Financial markets in India have taken yesterday's decision by the US Fed to hike interest rates for the first time in nearly a decade in their stride. A bigger test might come if the Fed now tightens more aggressively than markets are anticipating over …
17th December 2015
Passage of the long-awaited Goods and Services Tax (GST) in India continues to be delayed by major issues ranging from disagreements over the tax rate itself to which items will be covered. Given this, the Finance Ministry’s hopes of introducing the GST …
16th December 2015
India’s trade deficit remained stable in November as the continued slump in exports was offset by another collapse in imports. With this trend set to continue, the overall current account position looks unlikely to return as a source of vulnerability any …
The rise in Indian consumer price inflation in November doesn’t put the RBI’s inflation target for January 2016 under threat, but it does highlight that the central bank cannot be certain of meeting its more challenging medium-term targets. This bolsters …
14th December 2015
Wholesale price inflation picked up in November and, looking ahead, we think that it will rise further over the coming months and return to positive territory by Q1 2016. … Wholesale Prices …
India’s industrial sector performed well in October and favourable cyclical factors should help to sustain healthier growth in coming months. But structural headwinds are likely to hold back local industry over the longer term. … Industrial Production …
11th December 2015
Inflation is likely to have accelerated in November, as last year’s slump in global oil prices begins to drop out of the annual comparison. Looking ahead, the Pay Commission’s recommendation for a large rise in public sector wages is likely to add to the …
8th December 2015
The RBI is expressing a high degree of faith in the finance ministry’s ability to offset a rising public sector wage bill by boosting tax revenues or trimming other forms of current spending. We fear this faith is misplaced and that public investment will …
7th December 2015
The Reserve Bank of India (RBI) kept its repo rate on hold at 6.75% today and, rather than just being on pause, we maintain our view that the loosening cycle is now at an end. … RBI holds rates, loosening cycle now at an …
1st December 2015
The fall in India’s manufacturing PMI reading in November highlights that, despite recent signs of a recovery in the hard activity data, local industry continues to face significant headwinds. … Manufacturing PMI …
GDP figures for Q3 suggest that India was the world's fastest-growing major economy last quarter. But the official data remain inconsistent with numerous other indicators which suggest the economy is undergoing a bumpy recovery after years of weak growth. …
30th November 2015
Plans to overhaul India’s archaic bankruptcy laws, due to be discussed in the upcoming winter session of parliament, would be a major step towards creating a more favourable business climate and easing constraints in the banking sector. What’s more, in …
27th November 2015
The Reserve Bank of India has cut policy rates by 125bp so far this year, but there are a number of reasons to think that it will keep the repo rate on hold not just at next week’s policy meeting but throughout 2016. In particular, the RBI faces a tough …
25th November 2015
Prime Minister Modi has spent much of November on official visits to the UK and Singapore, but a number of domestic issues have made this a month that he will want to forget. … State elections, strikes, and civil servant …
23rd November 2015
The Indian rupee has weakened against the US dollar over the past month and, looking ahead, the currency could drift a little lower as the US Fed begins to tighten policy. But given the big improvement in India’s current account position over the past …
19th November 2015
