Slowing inflation to test India’s hawkish central bank
Lower than expected inflation, along with Modi’s reforms, open door for lower interest rates
Prime Minister Narendra Modi’s economic reforms are boosting potential growth, while at the same time we are seeing lower inflation, despite a rise in actual growth. Bloomberg economists argue there is now room for the Reserve Bank of India to cut rates and allow growth to catch up to potential, without a risk of fueling inflation.
There are indications that India’s growth trajectory is significantly stronger than previous releases showed, as press reports suggest India’s statistical agency will be revising its GDP series in its May release. Bloomberg economists calculated that GDP for fiscal 2016 will be revised up to 8.3% from 8%, while 2017 will be revised to 8% from 7.1%