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India Data Response

Wholesale Prices (Jul.)

The fall in Indian wholesale price inflation in July reflects easing wholesale food inflation and lower commodity prices. But given both WPI and CPI inflation are still elevated, we think the RBI will wait until Q4 to scale back the pace of its tightening. Asia Drop-In (25th Aug.): What’s the economic impact of a weak yen? What does the latest China-Taiwan flare-up mean for decoupling? How ugly are conditions in China’s real estate sector? Join economists from across our Asia services for this regular briefing on the region’s big investment stories. Register now.

16 August 2022

India Economics Update

Prospects for female labour participation in India

We agree with PM Modi’s assertion in his Independence Day speech over the weekend that boosting female participation in the labour force could have a major positive impact on the economy, but in truth the government’s record in this area is poor. Looking ahead, there are still reasons to think that female employment will rise over the coming years but we aren’t convinced that it will be transformational. In view of the wider interest, we are also sending this India Economics Update to clients of our Long Run Service. Asia Drop-In (25th Aug.): What’s the economic impact of a weak yen? What does the latest China-Taiwan flare-up mean for decoupling? How ugly are conditions in China’s real estate sector? Join economists from across our Asia services for this regular briefing on the region’s big investment stories. Register now.

15 August 2022

India Data Response

Consumer Prices (Jul.) & Industrial Production (Jun.)

The bigger-than-expected drop in inflation in July is a challenge to our view that the MPC will hike the repo rate by 50bps again next month. But core inflation remains pretty strong, and the industrial production data suggest the economy is holding up fairly well. In all, we think the MPC will wait for more evidence of easing price pressures before scaling back the pace of policy tightening.

12 August 2022

Key Forecasts

Main Economic & Market Forecasts

% y/y unless stated

Latest

Q2 2022

Q3 2022

Q4 2022

2022

2023

2024

GDP

+4.1*

+20.3

+9.1

+4.3

+9.0

+6.5

+6.5

Consumer Prices

+7.0**

+7.3

+7.3

+6.4

+6.8

+5.1

+4.7

Current Account (4Q Sum, % of GDP)

-1.1*

-2.4

-2.9

-3.0

-3.0

-2.0

-2.0

Repo Rate %

5.40

4.90

5.90

6.15

6.15

6.40

6.40

Standing Deposit Facility %

4.65

4.65

5.65

5.90

5.90

6.15

6.15

Cash Reserve Ratio %

4.50

4.50

4.50

4.50

4.50

4.50

4.50

10-Yr Government Bond Yield %

7.31

7.45

7.55

7.75

7.75

7.25

6.75

INR/US$

79.7

79.0

79.8

80.0

80.0

78.0

78.0

Sensex

59,461

53,019

55,500

51,500

51,500

58,600

68,700

Sources: Bloomberg, CEIC, Capital Economics, *Q1 2022; **Jun.; End of period


Political wranglings weaken BJP’s hand

India Economics Weekly

30 November 2022

Our view

The surge in global commodity prices will take a little gloss off India’s economic recovery this year but we still expect stronger GDP growth than the consensus. Higher commodity prices will also keep inflation well above the ceiling of the RBI’s 2-6% target range. The RBI has started its hiking cycle and we think rates will rise by more than the consensus is expecting over the next 12-18 months.

Latest Outlook

India Economic Outlook

More frontloading to come

Strong economic growth and surging inflation have prompted the RBI to kick-start its hiking cycle and we think the central bank will continue to frontload policy tightening. In all, we think the repo rate will rise by a bit more than the consensus expects over the next six to nine months. We also expect policymakers to step up financial repression so that policy tightening doesn’t significantly worsen the public debt dynamics.

7 July 2022