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Consumer price inflation unexpectedly dropped in March as concerns over the impact of heavy rains on food inflation proved unfounded. What’s more, core inflation remains low, and headline inflation is now comfortably below the Reserve Bank’s near-term …
13th April 2015
The government’s ambitious plans to almost double exports by 2020 from current levels are no bad thing, but in truth the targets look unrealistic. Reforms that would significantly boost export prospects, such as loosening labour laws and easing land …
10th April 2015
Inflation is likely to have accelerated in March, in large part due to rising food prices caused by recent unseasonable rains. But weekly data suggest that the majority of the inflation spike may have passed, while the government could use its large stock …
9th April 2015
Governor Rajan opted not to follow up on March’s rate cut in today’s policy review, with the repo and the reverse repo rates kept on hold at 7.50% and 6.50% respectively. But further rate cuts are still likely, perhaps even at another unscheduled meeting …
8th April 2015
The first rate hike in the US is edging closer, but India’s dramatically improved external position and the fact that the rupee has strengthened in recent months suggest that the Reserve Bank of India (RBI) is under little pressure to follow in the …
3rd April 2015
India’s manufacturing PMI edged up in March, but the bigger picture is that conditions are still subdued by past standards. Looking ahead, with progress on creating a favourable business environment remaining slow, the sector looks set to struggle for …
Recent cuts to policy interest rates should eventually help to boost bank lending in India, the weakness of which has been a significant cause of the economic slowdown over the past few years. But while lower interest rates on loans will help, concerns …
1st April 2015
It has been nearly a year since Prime Minister Narendra Modi and the BJP swept to victory in India's general election amid promises of wide-ranging reform to revamp the struggling economy. In this Focus , we assess how the reform agenda has been …
27th March 2015
The past month has shown that India's authorities are still leaning towards policy loosening to support a cyclical rebound in economic growth, despite the strength of the revised GDP data. For a start, although the Finance Ministry is still aiming to rein …
24th March 2015
The Indian rupee has taken Wednesday’s FOMC meeting in its stride, with the currency dropping only fractionally against the US dollar since then. Looking ahead, the economy is in much better shape to weather tighter US monetary policy than it was two …
20th March 2015
Concerns about destabilising capital flows to emerging markets such as India have again come to the fore, but one factor that often gets overlooked is the role of overseas remittances. Remittance flows into India were twice as large as portfolio flows in …
18th March 2015
Wholesale price inflation dropped further into negative territory in February to its lowest rate since the series began in 2005. This was in part due to falling oil prices, but low core inflation provides more evidence of economic slack. … Wholesale …
16th March 2015
Consumer price inflation picked up in February, having already increased sharply since late 2014. But the rebound has been driven entirely by food prices. Core inflation remains low and flat. The Reserve Bank will not shift its policy stance as a result. …
12th March 2015
India’s current account deficit narrowed in Q4 and remains far smaller than in 2013 when the rupee plunged to record lows against the US dollar. With this improvement set to be maintained, there is little risk of a repeat of the currency crisis. … …
10th March 2015
The recent revisions to historic GDP data have been the source of much confusion, not least within the Reserve Bank of India (RBI). In this Update , we look at four indicators that the RBI appears to be putting more weight on than the revised GDP series …
Forthcoming consumer price inflation data for February should show that the Reserve Bank of India (RBI) remains on course to meet its target for the start of 2016, which has now been formalised under the new monetary policy framework. But further ahead, …
9th March 2015
The Reserve Bank of India’s decision to cut its policy rates today was unscheduled but not entirely a surprise: we had argued that there was a significant chance of an inter-meeting cut following the budget last weekend. With Governor Rajan voicing doubts …
4th March 2015
The Finance Ministry’s plans outlined in the Budget to significantly ramp up capital expenditure are to be welcomed, but fully implementing them will be a tough challenge. Potential impediments include another shortfall in tax revenues, and a lack of …
Although the new monetary policy framework agreed upon by the Reserve Bank of India (RBI) and the government is a positive step, it is also largely symbolic. The framework is unlikely to have much impact on policymaking, given that the new inflation …
3rd March 2015
The FY15/16 budget unveiled over the weekend contained no fireworks but included measured steps to boost public investment while also ensuring fiscal prudence. The key now is for the budget to be fully implemented, and also for it to be supplemented with …
2nd March 2015
Amid the wider interest in what will be unveiled in the FY15/16 budget on Saturday, prospects for the rest of the current session of parliament have slipped under the radar. A number of issues that can have an impact on economic growth are up for debate, …
27th February 2015
Investors are likely to focus on plans for fiscal consolidation when the FY15/16 budget is unveiled on Saturday, but progress on economic reform also warrants close attention. The crucial things to look for are cuts to the subsidy bill, greater capital …
25th February 2015
Eighteen months ago the rupee plunged to a record low against the US dollar as concerns over India’s external vulnerabilities made it one of the hardest-hit economies during the “taper tantrum”. Since then, the balance of payments position has radically …
24th February 2015
India’s revised GDP data paint a far healthier picture of the economy over the past couple of years than had previously appeared the case. GDP growth for FY13/14 was revised up from 4.7% to 6.9%. In addition, the Statistics Office estimates that the …
19th February 2015
The rupee has been the best performing major EM currency so far this year. This is in part due to falling commodity prices which have helped to lower India’s import bill, but it is also the result of strong foreign inflows into local equity markets. … …
18th February 2015
Wholesale price inflation dropped into negative territory in January to its lowest rate since June 2009. In particular, the sharp fall in core inflation adds to evidence elsewhere of increasing economic slack, and bolsters the case for the RBI to cut …
16th February 2015
India’s trade deficit narrowed in January as the sharp fall in global oil prices continued to feed through to the import bill. The smaller deficit provides the central bank with further scope to loosen policy again over the coming months. … Trade …
13th February 2015
Unlike the recently revised GDP data, the rebasing of India’s consumer price data appears to have done little to alter the headline numbers. The big picture is that inflation is still comfortably below the RBI’s near-term goals. Meanwhile, though we …
12th February 2015
Forthcoming consumer price inflation data for January will be the first in the rebased series but, unlike the recently revised GDP data, we doubt that this will have a spectacular impact on headline numbers. The big picture is that inflation looks set to …
10th February 2015
At face value, today’s GDP data for Q4 suggest that India’s economy slowed at the end of 2014, but that it is still growing faster than China’s. However, the GDP calculations under the new methodology remain wildly inconsistent with numerous other …
9th February 2015
Recent moves from the Reserve Bank of India (RBI) to encourage more lending have brought the health of the domestic banking sector under scrutiny. But while the level of bad loans in the system have been rising, there are a number of reasons to think …
6th February 2015
Governor Rajan opted not to follow up on January’s unscheduled rate cut with further loosening in today’s policy review, with the repo and the reverse repo rates kept on hold at 7.75% and 6.75% respectively. But further rate cuts are still likely, perhaps …
3rd February 2015
Revisions to India’s historic GDP data have been greeted with both cheers and bemusement. One of the more puzzling aspects is that nominal GDP in the last fiscal year was left all but unchanged by the revisions, despite faster growth. Meanwhile, the …
2nd February 2015
At face value, today’s revisions to India’s historic GDP data suggest that the economy has been performing far better than had previously appeared. If true, this implies there is much less room for a substantial pick-up in growth without stoking …
30th January 2015
The government’s next budget, due to beannounced on 28th February, has taken on even more importance than normal, with the ReserveBank of India (RBI) looking for fiscal consolidation and investors hoping for details on wider reform. In this Watch, we …
The rupee has been among the world’s best performing currencies so far this year, due to a combination of a narrowing trade deficit and strong foreign inflows into local equities. This has given the RBI even more scope to loosen policy further, perhaps as …
29th January 2015
Following the RBI’s decision to cut interest rates at an unscheduled meeting earlier this month, a small majority of forecasters expect rates to be kept on hold at the scheduled policy meeting next week (Tuesday). But there are good reasons to expect …
27th January 2015
The Reserve Bank of India (RBI) shocked markets earlier this month by cutting its main policy rates at an unscheduled meeting. The accompanying statement also paved the way for further policy loosening. Indeed, with the latest data showing that both …
22nd January 2015
Having already made a good start to 2015, India’s financial markets have rallied further following the RBI’s decision to cut interest rates at an unscheduled meeting last week. Bond yields have dropped, while equity markets have regained their poise after …
20th January 2015
Prime Minister Modi’s use of four executive orders since the end of December has added some impetus to the reform agenda, which has arguably seen the biggest strides made in areas of tax and foreign investment. But progress on relieving some of the more …
19th January 2015
Following the RBI’s decision to cut interest rates at an unscheduled meeting earlier today, data showing that the trade deficit narrowed in December underline that the central bank has scope to loosen policy further over the coming months … Trade …
15th January 2015
The RBI has shocked markets by cutting its policy rates at an unscheduled meeting today, much sooner than most had expected. Given the weakness of the economy and recent falls in inflation, we maintain our forecasts that the repo and reverse repo rates …
Wholesale price inflation edged up in December, but the big picture is that it remains close to five-year lows. What's more, our proxy for core WPI dropped sharply last month, suggesting that domestic demand remains weak. … Wholesale Prices …
14th January 2015
The rise in consumer price inflation in December was due in large part to price falls a year ago rather than any increases recently. The more significant point is that inflation remains subdued by past standards and well within the RBI’s near term …
12th January 2015
Consumer price inflation is likely to have edged up in December as the unwinding of favourable base effects from food inflation more than offset the impact of tumbling oil prices and weak core price pressures. But the bigger picture is that inflation …
9th January 2015
The end to strike action in India’s coal sector three days earlier than planned should ensure a quick resumption to normal production levels, which will reduce the risk of blackouts in the near term. But the strikes are another illustration of the …
8th January 2015
In our first Watch of 2015, we outline the prospects for India’s economy over the coming year. Falling commodity prices should brighten the outlook by providing a boost to consumer spending and helping to improve the fiscal position. Meanwhile, a …
7th January 2015
On the face of it, 2014 has been another disappointing year for the Indianeconomy. Growth over the first three quarters averaged just 5.2% y/y, only asmall improvement from the trough of 2012-2013 and still far below the ratesachieved in the prior decade. …
18th December 2014
India has not been immune to the turbulence that has hit EM markets over the past few days in the wake of the unfolding crisis in Russia. This has led to suggestions that the RBI is now likely to delay policy loosening. But local market moves have been …
17th December 2014
The recent sharp slowdown in inflation, combined with dovish commentary from the RBI in its policy review earlier this month, have prompted India’s financial markets to price in the rising likelihood of imminent rate cuts. Most notably, local bond yields …
16th December 2014
