India inflation

By Amit Bhandari, Gateway House

Petroleum prices touched a new four -year low of $72.5 per barrel after the Organization of Petroleum Exporting Countries (OPEC) decided last week against reducing production . The 35 per cent price drop is a huge relief for India, where petroleum products comprise a third of the import bill. Cheaper oil means narrower current account and fiscal deficits, and reduced prices at the pump for consumers shopping for food-grains, vegetables, cement and steel.

Can this happy situation last? Will 2015 be the year in which high oil prices do not disadvantage India? Judging by history, it may be.

Before oil prices began to rise in 2003, a 20-year run of price stability fuelled global growth. But cheap oil killed off investments in exploration and production. OPEC gained market share, from 30 per cent of global production in 1983 to over 40 per cent by the end of 1990s. Read more

International air travelers will recognise the tag line from the HSBC campaign in airports worldwide: “In the future, South-South trade will become norm, not novelty”. If it depends on the Mahindra group and other Indian conglomerates, that tag line could become reality with regards to Africa and India.

Taking optimism to a new level, a collection of African leaders and Indian industrialists dared to dream big during a closed session of the WEF India Economic Summit in Delhi, agreeing to an informal ambition of $500bn Indo-African trade by 2020. Read more

An Indian labourer carries a sack of vegetables on his head at a wholesale market in Kolkata on September 14, 2011Economists expect the drop in global food prices to help keep inflation low across emerging Asia over the next year, benefiting consumers and allowing central banks to keep monetary policy loose.

The International Monetary Fund estimates that global commodity prices are 8.3 per cent lower than at the start of the year. This can have some complicated effects, with some winners and losers within the same country. Read more

Investors have been awaiting an upturn in India’s economy since Narendra Modi, prime minister, took power in May. But a raft of recent data paints a mixed picture, with inflation moderating while slack industrial production conflicts with some robust consumer spending signals.

The Wholesale Price Index (WPI), out on Monday, confirmed that inflation is easing, reaching a 58-month low of 3.74 per cent year-on-year in August from 5.19 per cent in July. Read more

India’s central bank left interest rates unchanged for a third straight meeting and tweaked a banking regulation to encourage lending as Raghuram Rajan, governor, sought a balance between promoting economic growth and maintaining vigilance against inflation.

Rajan kept the benchmark repurchase rate at 8 per cent, the Reserve Bank of India (RBI) said in a statement on Tuesday, as economists had widely expected. The statutory liquidity ratio – which mandates how much banks must invest in government bonds – was reduced to 22 per cent of net liabilities from 22.5 per cent, effectively freeing up funds for lending. Read more

Jimmy Choos under your sari and an African safari for the Diwali long weekend?

A new report by Kotak Wealth Management and Ernst & Young – Top of the Pyramid 2014 – finds that India’s super rich are “ready for change” as a strong new government comes to power in New Delhi – and they’re spending to prove it.

 Read more

Narendra Modi won a clear majority in India’s recent general elections, relieving him of the trouble of having to head a motley coalition. But the new prime minister does face some other tough balancing acts.

As the beyondbrics team travelled around India during the campaign – from the slums of Mumbai to Modi’s native Gujarat – we found people everywhere complaining at rising prices, with food at the heart of the problem. India’s central bank will make its first interest rate decision under the new government on Tuesday, as the new government seeks to strike the right balance between reining in prices and urging on growth. Read more

While exploring Dharavi, one of Mumbai’s largest slums, earlier this week we found there was one complaint that most residents had with the current government: inflation. When we asked what the biggest change has been in the five years since the last election, Mohammed Raza Khan, 40, told us: “Prices have gone up a lot that’s the biggest change… The poor are fed up.”

Under its governor, Raghuram Rajan, India’s central bank has cracked down on the problem by hiking rates and put forward an inflation targetting regime. But will the El Niño weather phenomenon – which usually mean drought for Asia - sabotage recent improvements? Read more

By Surjit Bhalla

I’m a natural optimist, but there are still plenty of good reasons to be positive about India’s growth, even if May’s election does not go the way polls suggest. Perhaps the best way to appreciate this is just to assume that this is not one of the most important polls in India’s democratic lifetime. What would you expect to happen? For starters: the normal improvements of the business cycle. Read more

Infosys kicked off earnings season on Tuesday morning and inflation numbers were released later in the day, putting the spotlight on business and the macroeconomy in India.

Beyondbrics took a look at the latest opinion polls and the more charismatic but yet less politically active of the Gandhi siblings – Priyanka Gandhi. Read more

Raghuram Rajan, governor of the Reserve Bank of India, may be right when he dismisses the link between inflation and growth – if Indian shoppers are anything to go by.

Rajan has been hiking the repo lending rate since he took office in September, looking to control inflation. And quite right too, says KPMG: it seems that high inflation is hitting consumer confidence in Asia’s third largest economy. Read more

Raghuram Rajan, governor of the Reserve Bank of India (pictured), rarely fails to surprise.

He wished everyone “happy new year” with a 25 basis point hike in the repo lending rate on Tuesday – bringing it to 8 per cent – and added the woeful statement that economic growth would lose momentum in the third quarter of the current financial year.

The decision to hike rates goes against expectations, with economists in a Reuters poll last week forecasting that Rajan would hold steady. Read more

As India’s current account deficit ballooned to unsustainable levels last year, the government slammed the breaks on gold imports with duty hikes and new rules on re-export of the yellow metal. The result was that the jewellery industry hit a standstill.

However, according to Pakistani authorities, India’s official inflows of gold have simply shifted to unofficial channels. Time for action. Read more