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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
The drop in India’s manufacturing PMI reading in June highlights the fact that, despite recent signs of a recovery in activity, local industry continues to face significant headwinds. … Manufacturing PMI …
1st July 2015
The monsoon session of parliament, due to begin in mid-July, has taken on extra significance given that the government's reform agenda has recently run into roadblocks. Top of the list of priorities is progress on land and tax reform. But there is reason …
30th June 2015
The government’s plans to inject more capital into local banks are a positive step, but they are too limited to revive the ailing sector. Larger capital injections are needed to strengthen banks’ balance sheets. If followed by privatisation of the banks, …
26th June 2015
Some of India's latest activity data are showing signs of improvement. For example, industrial production has accelerated over the past few months. Measures of expenditure and income tell a similar story. There has been a pick-up in new capital …
23rd June 2015
The Indian rupee has rallied in the past few days, but we expect the currency to come under some pressure as the US Fed begins to tighten policy later this year. However, given the huge improvement in India’s current account position over the past couple …
22nd June 2015
The small rise in guaranteed prices for crops produced during the monsoon season that was announced by the government yesterday marks an important step away from populist policymaking of the past. What's more, it should help to anchor food prices, …
18th June 2015
The lifting of restrictions on foreign direct investment into a number of sectors of the economy has been one of the successes of Prime Minister Modi’s reform agenda so far. FDI inflows have picked up, but they remain low relative to the size of India’s …
17th June 2015
India's trade data for May are a mixed bag, with the trade deficit narrowing despite another contraction in export growth. The big picture, however, is that India's external position is far less a source of vulnerability now than in recent years. … …
16th June 2015
Wholesale price inflation edged up in May, but it remains firmly in negative territory and close to its lowest rate since the series began in 2005. Importantly, core inflation fell further, providing more evidence of slack in the economy. … Wholesale …
15th June 2015
Consumer price inflation edged up in May but not enough to put the Reserve Bank’s inflation target under threat. … Consumer Prices (May) & Industrial Production …
12th June 2015
India’s current account deficit narrowed in Q1 and, along with the pick-up in net FDI inflows, this has helped to boost the overall balance of payments position to its largest surplus since 2008. With this improvement set to be maintained, a sharp …
11th June 2015
Indian consumers have struggled in recent months despite the tailwinds of lower inflation and reductions in interest rates. This can be explained in part by continued problems in the labour market and the domestic banking system. With progress in reducing …
10th June 2015
Inflation is likely to have stayed subdued in May. There are rising concerns that a weaker-than-normal monsoon could push inflation up in the months ahead. But we remain sanguine: many factors in addition to rainfall and harvests help determine food price …
8th June 2015
Slow progress in liberalising India’s rigid labour market has been one of the biggest disappointments of PM Modi’s first year in power, but there are signs of improvement at state level, most notably in Rajasthan. While it wouldn’t be easy, the central …
5th June 2015
India's May PMI readings for both the manufacturing and services sectors suggest that activity remains subdued by past standards. The PMIs add to the list of indicators that contradict the official GDP data, which suggest that the economy is growing …
3rd June 2015
Today's decision by the Reserve Bank of India (RBI) to cut the repo rate for the third time this year to 7.25% is unlikely to be the last in the current loosening cycle. But the RBI can't be complacent about meeting its medium-term inflation target. Given …
2nd June 2015
At face value, today’s GDP data for Q1 suggest that India is the fastest-growing major economy in the world. But the GDP data remain wildly inconsistent with numerous other indicators that point to continued slack in the economy. … GDP …
29th May 2015
Prime Minister Modi’s first year in office was a mixed bag. The pace of economic reform will need to be stepped up in his second year to justify the investor enthusiasm that greeted his election victory. But with political goodwill unlikely to last …
28th May 2015
Signs of continued economic slack and the weakness of inflation are key reasons for the Reserve Bank of India (RBI) to resume its rate-cutting cycle in its upcoming policy review on 2 nd June. One other important, but overlooked, factor that the RBI is …
26th May 2015
As Prime Minister Modi's first year in office draws to a close, our view that the economic reform agenda would fall short of (at times frenzied) expectations appears to have been proved correct for the time being. Admittedly, PM Modi can point to some …
22nd May 2015
India’s financial markets have struggled relative to their emerging market peers over the past few weeks, with the rupee weakening, bond yields edging up and the equity rally losing steam. These moves primarily reflect domestic concerns, most notably that …
20th May 2015
Two years ago this month the rupee entered a prolonged plunge against the US dollar amid the “taper tantrum”, eventually falling to an all-time low. But in the event of external financing conditions taking another turn for the worse, India’s lower current …
18th May 2015
Recent failures to amend the domestic tax system and land acquisition laws are the latest examples of the government's reform agenda running into roadblocks over the past few months. This supports our view that the economy is unlikely to fulfil its …
15th May 2015
Wholesale price inflation recorded another large drop in April, to its lowest rate since the series began in 2005. Importantly, as the consumer price data released on Tuesday also showed, core inflation remains very weak, providing more evidence of slack …
14th May 2015
The drop in consumer price inflation in April was due in large part to a decline in food price pressures, but perhaps the more significant point for the Reserve Bank is that core inflation remains low and flat. This reinforces the case for another …
12th May 2015
Inflation is likely to have remained subdued by past standards in April, with a small pick-up in transport inflation being offset by muted food and core price pressures. The big picture is that the Reserve Bank looks on course to meet its inflation target …
7th May 2015
India’s manufacturing PMI dropped in April, underpinning the difficulties facing the sector. Looking ahead, with progress on creating a favourable business environment remaining slow, a boom in manufacturing output seems unlikely. … Manufacturing PMI …
4th May 2015
The rupee was one of the worst performing EM currencies against the US dollar in April, but we doubt that this will cause panic among India’s policymakers. Over a longer time horizon the rupee remains a relative outperformer, and given its appreciation in …
30th April 2015
The government’s plans to boost capital expenditure, along with looser monetary policy, should help to support the recent pick-up in investment activity over the coming months. But continued constraints on the reform front mean that a spectacular rebound …
Forecasts for a weaker-than-normal monsoon in India this year have raised concerns about the effect on the wider economy. Although lower rainfall could affect GDP growth and inflation at the margin, there are a number of factors that should mitigate the …
28th April 2015
Some of the latest data out of India have given reason for cheer, but there is plenty of evidence of continued cyclical weakness. For example, capacity utilisation rates are low, growth in sales of consumer goods has slowed so far this year, and bank …
24th April 2015
After touching record highs in early March, Indian equities have fallen back in recent weeks. Looking ahead, with valuations still looking stretched and uncertainty over the government’s tax policy unnerving investors, a spectacular rebound in the equity …
22nd April 2015
The surge in gold imports last month is likely to have been boosted by temporary factors, including an unleashing of pent-up demand by buyers that had been expecting tax cuts (which didn’t materialise) and greater consumer demand ahead of religious …
21st April 2015
Data released today show that India’s trade deficit widened in March, but remained at sustainable levels. The more worrying aspect is the collapse in exports, which leaves the government’s longer term targets looking increasingly unrealistic. … Trade …
17th April 2015
Comments from Finance Minister Arun Jaitley that he plans to raise nearly US$6.5bn by retrospectively taxing foreign companies would, if acted upon, represent a major relapse on economic reforms, and could dampen investment into India. A more effective …
16th April 2015
Among the more headline-grabbing developments in the IMF’s latest World Economic Outlook is that the Fund is now forecasting India’s economy to grow faster than China’s in 2015 and 2016. But putting aside the accuracy of the revised GDP data for India …
15th April 2015
Wholesale price inflation fell further into negative territory in March to its lowest rate since the series began in 2005. Crucially, core inflation continues to drop sharply, providing more evidence of economic slack. … Wholesale Prices …
