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PMIs continue to be at odds with hard data The PMI surveys for April released this week suggest that both the manufacturing and services sectors in India started Q2 on a strong footing. The manufacturing PMI reached a 4-month high while the services PMI …
5th May 2023
The idea of a new BRICS currency to settle trade or hold in reserves instead of the dollar has been doing the rounds recently. This could be modelled on the IMF’s Special Drawing Rights. But getting India on board with China would be difficult. And if the …
4th May 2023
PMI readings continue to be at odds with the hard activity data India’s manufacturing and services PMI readings rose in April but are at odds with the hard activity data that point to more subdued domestic and external demand. The composite PMI rose from …
3rd May 2023
Industry to continue facing headwinds Growth in India’s core infrastructure industries slowed in March, indicating that some of the resilience in the industrial sector at the start of the year may be fading. Domestic and external headwinds mean a …
28th April 2023
Fall in the rupee this year likely to be limited The rupee is up by around 1% against the US dollar so far this year, leaving it in the middle of the pack among other EM currencies. (See Chart 1.) Chart 1: Currencies vs. US$ (% change, YTD) Sources: …
Door remains ajar for further tightening… The minutes of the MPC’s April meeting – in which the committee voted unanimously to keep the repo rate on hold (at 6.50%) for the first time in a year – were published this week. While it has been clear for some …
21st April 2023
India is benefitting from maintaining its historic unaligned stance in tensions between the US and Russia. Since the start of the war in Ukraine, India has been ramping up oil imports from Russia to take advantage of discounted prices. (See Chart 1.) And …
20th April 2023
India becomes home to world’s largest population According to UN projections, India will today become home to the world’s largest population, displacing China from the number one spot. In truth, the exact timing of the transition is unknown: it may even …
14th April 2023
Headline CPI rate now likely to remain within target range The drop in headline consumer price inflation back to within the RBI’s 2-6% target range in March supports our view that the central bank’s hiking cycle has come to an end. Headline CPI inflation …
12th April 2023
Raising exports to US$2trn by 2030 a tough task This week marked the start of the government’s new Foreign Trade Policy (FTP). While previous FTPs have had a five-year span and have typically focussed on financial incentives for exporters such as …
6th April 2023
The RBI’s decision to keep the repo rate on hold at 6.50% today belied the central bank’s recent hawkish communications. The door remains ajar for hikes in the future but with headline inflation set to fall back to within the RBI’s 2-6% target range …
RBI unlikely to tighten any further The RBI’s decision to keep the repo rate on hold (at 6.50%) today comes as a surprise and belies the central bank’s recent hawkish communications. The door remains ajar for hikes in the future but with headline …
The widening in India’s current account deficit last year, to 2.4% of GDP, was not as significant as many had feared in the context of the surge in commodity prices. Looking ahead, we think the deficit will narrow over the coming quarters as domestic …
4th April 2023
Note: Join our 6th April online briefing all about the risks to EMs from banking turmoil. Register now . Strength of manufacturing PMI supports rate hike this week India’s manufacturing PMI reading edged up in March and points to healthy growth in the …
3rd April 2023
Note: Join our 6th April online briefing all about the risks to EMs from banking turmoil. Register now . Rosneft, IOC deal will keep Russian oil flowing We’ve made the case in much of our research that, in an increasingly fractured global economy that …
31st March 2023
Hike to repo rate (to 6.75%) next week will likely be last in the cycle Slower growth and inflation could mean MPC is laying groundwork for cuts before long Consensus coming round to our view that rates will be cut in early 2024 With the turmoil in the …
30th March 2023
Recent turmoil in the banking sector may have been a US and European story, but there are potentially important angles for Emerging Market investors. Our latest EM Drop-In explored the economic spill-over risks from the recent panic and the …
28th March 2023
Labour reforms could encourage more MNCs The overarching message from our latest India Economic Outlook published this week is that while prospects for the economy look a little uninspiring over the near term, there are reasons to be optimistic further …
24th March 2023
Spill-overs from the turmoil in the global banking system to India have been limited so far, but the big unknown is whether difficulties will flare up at home. Bank problems can arise via multiple channels. There may be banks that have not adequately …
22nd March 2023
Overview – The RBI’s tightening cycle is in its final throes and, as the economy softens and inflation drops back to within the central bank’s 2-6% target range, we think rates cuts will materialise in early 2024. Over the longer term, India’s growth …
20th March 2023
While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
Limited contagion, but Indian banks a worry Our coverage of the collapse of SVB and the turmoil at Credit Suisse and their implications for the global economy and financial markets can be found on our dedicated webpage . For India, the fallout so far has …
17th March 2023
A key channel through which emerging markets could be affected by the strains in the global banking sector is if lending by foreign banks falls sharply. On this front, EMs’ vulnerabilities have eased since the Global Financial Crisis. But there are still …
16th March 2023
At the time of writing, financial markets appear to be stabilising after the turmoil caused by the collapse of SVB. And it doesn’t look like EMs have suffered large capital outflows or strains in their banking sectors. If this relatively benign scenario …
14th March 2023
Drop in headline inflation not large enough to prevent April rate hike The slight drop in headline CPI inflation in February won’t have been enough to ease the concerns of the hawks on the MPC and, as a result, we now expect another 25bp hike to the repo …
13th March 2023
Industry to remain soft over the coming months Growth in industrial production picked up in January, supporting our view that Q4 will have marked the trough for q/q growth. Nevertheless, the outlook for the industrial sector over the coming months is …
10th March 2023
Despite improvement, coal stocks remain low Fears over a shortage of coal in India have resurfaced in recent weeks amid expectations over another extremely hot summer, which would push up electricity demand. India remains heavily reliant on coal for …
We think MSCI’s India Index will fall over the next couple of quarters in local-currency (LC) terms, amid subdued domestic economic activity and a general deterioration in investors’ appetite for “risky” assets. While it was among the best performers in …
9th March 2023
Following the release of GDP data for Q4 (Q3 of FY22/23) this week, we now know that the economy grew by 6.7% in 2022 as a whole, one of the fastest growth rates anywhere in the world. Output was 10% above pre-pandemic levels at the end of last year. (See …
3rd March 2023
Manufacturing PMI likely to drop back further India’s manufacturing PMI reading edged down in February to a four-month low. We expect the reading to drop further over the coming months as both external and domestic demand soften. The manufacturing PMI …
1st March 2023
Economy coming off the boil GDP data for Q4 (Q3 of FY22/23) show that India’s economy came off the boil at the end of last year as higher interest rates weighed on household consumption and investment. But with the hawks still in the ascendancy within the …
28th February 2023
MPC minutes highlight divergence of views The MPC minutes of the RBI’s policy meeting from earlier this month – in which the pace of tightening slowed to a 25bp hike , taking the repo rate to 6.50% – confirm that there are significant differences of …
24th February 2023
In a crowded field given the FY23/24 Union Budget and the RBI’s more-hawkish-than-expected policy announcement, the Adani short-selling crisis has been the main story over the past month. So far at least, there are few signs of broader contagion. Foreign …
21st February 2023
Food price inflation may be overstated The consumer price data for January released this week proved something of a nasty surprise , with the headline rate jumping unexpectedly sharply to 6.5% y/y, pushing it above the ceiling of the RBI’s 2-6% target …
17th February 2023
If it isn't already, India will soon be the world’s most populous nation. But this doesn’t mean that policymakers can simply wait for the economic benefits to arrive. The key to unlocking India’s demographic potential is to develop the manufacturing …
15th February 2023
Chances of another rate hike have just risen The unexpectedly large jump in headline consumer price inflation in January to 6.5% y/y is a clear challenge to our view that the hiking cycle is at an end. Further signs of the economy coming off the boil and …
13th February 2023
RBI still cautious on inflation Though the RBI slowed the pace of tightening with a 25bp hike to the repo rate (to 6.50%) this week, the tone of the communications was more hawkish than we had anticipated. The slight rise in the 10-year bond yield …
10th February 2023
The Adani saga hasn’t done much to reduce the comparatively stretched valuation of India’s stock market. In our view, that means there is still scope for it to underperform over the long run. India’s stock market generally avoided the sell-offs seen in …
9th February 2023
The RBI further slowed the pace of monetary tightening with a 25bp hike to the repo rate (to 6.50%) today and, though it has left the door ajar for further tightening, the softer growth outlook and improvement in the inflation picture suggests to us …
8th February 2023
RBI’s tightening cycle is probably at an end The RBI further slowed the pace of monetary tightening with a 25bp hike to the repo rate (to 6.50%) today and, though it has left the door ajar for further rate hikes, the softer growth outlook and improvement …
While some of the measures unveiled in the FY23/24 Union Budget are geared towards shoring up popular support ahead of next year’s general election, there is a clear long-term focus too. The projected jump in capital expenditure, cuts to import duties on …
3rd February 2023
Spill-overs from the Adani crisis limited, for now Though the FY23/24 Union Budget provided some respite, the short-seller attack on the Adani Group following the publication of a report by US-based Hindenburg Research alleging “brazen stock manipulation …
MPC to mark end of tightening cycle with 25bp hike to repo rate (to 6.50%) next week Slower growth and inflation could mean MPC is laying groundwork for cuts before long Rate cuts to materialise in early 2024, sooner than consensus expects With …
2nd February 2023
Finance Minister Nirmala Sitharaman appears to have successfully demonstrated her long-term commitment of reining in the fiscal deficit while still providing support to the economy in today’s FY23/24 Union Budget announcement. There is a chance of fiscal …
1st February 2023
Indian manufacturing remains resilient India’s manufacturing PMI showed signs of moderation in January after defying gravity for several months previously. It should drop further over the coming months as the economy comes off the boil. The manufacturing …
For watchers of India’s economy, next week is one of the most significant of the year as Finance Minister Nirmala Sitharaman delivers the Union Budget for FY23/24 on Wednesday. Ahead of the announcement, the fiscal position looks pretty healthy. The …
27th January 2023
We held a Drop-In today to discuss the big economic and financial market development across Emerging Asia. (You can see an on-demand recording here .) This Update answers several of the questions that we received, some of which we couldn’t answer during …
26th January 2023
More signs of a growing electronics ecosystem We argued at the end of 2022 that one of the key developments for investors to look out for this year was signs of a growing electronics ecosystem in India. We are only three weeks into the new year but there …
20th January 2023
India has historically remained unaligned geopolitically but we made the case last year that, in a fracturing global economy , it was more likely to lean towards a US-led bloc and away from a China-led bloc. Events over the past month have strengthened …
18th January 2023
Wholesale inflation drops for the sixth month in a row The drop in Indian wholesale price inflation for the sixth month in a row in December further reinforces our view that the MPC will draw the tightening cycle to a close after one more rate hike in its …
16th January 2023