Indian economy may be recovering faster than anticipated: Oxford Economics

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November 15, 2020 12:01 PM

Costlier vegetables and eggs pushed up retail inflation to a nearly six-and-a-half year high of 7.61 per cent in October, keeping it significantly above the comfort zone of the Reserve Bank.

Improving medium-term growth rates under these circumstances will require reforms to support investment and boost productivity.The new set of economic reforms being introduced with urgency by India’s national government is barely scratching the surface of what needs to be done for the economic growth.

The Indian economy is seen recovering faster than expected and the Reserve Bank is likely to have come to an end of the rate easing cycle, according to global forecasting firm Oxford Economics.It further said that inflation is expected to average significantly above 6 per cent in the fourth quarter of the current fiscal and the RBI may hold policy rates in December monetary policy review meeting.

“Consumer inflation rose back to pre-virus highs in October, with almost every broad category other than fuel experiencing a rise in prices. While Q4 is likely to mark the peak for inflation, we have turned more cautious on the trajectory over 2021,” it said.

Costlier vegetables and eggs pushed up retail inflation to a nearly six-and-a-half year high of 7.61 per cent in October, keeping it significantly above the comfort zone of the Reserve Bank. Retail inflation stood at 7.27 per cent in September 2020.

“At the same time, robust bottom-up activity data suggest that the economy may be recovering faster than we anticipated. As such, we see an increasing possibility that the RBI’s easing cycle has ended,” Oxford Economics said.

Moody’s Investors Service has also revised upwards its GDP forecast for India to (-) 8.9 per cent contraction in the 2020 calendar year, as the economy reflates after a long and strict nationwide lockdown but added the recovery is patchy.

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