Aurodeep Nandi is chief economist (India and Asia ex-Japan) and India economist, respectively, for Nomura
As growth strengthens and the RBI’s inflation-targeting credibility comes under greater scrutiny, a policy pivot would become increasingly likely.
The spectre of lockdowns is looming large once more, and while there are bright spots, there are also risks and uncertainties to watch out for.
One of the key attractions of every Budget season is the tightrope walk between growth vs fiscal prudence. Next year will be no different except that the tightrope will be set significantly higher from the ground.
While we may estimate a sequential improvement in GDP growth in the second quarter, there is likely to be another massive contraction of (-) 10.4 per cent. Growth is likely to remain in negative territory for the next two quarters.
Easing the lockdown before controlling the pandemic is now stalling activity significantly below normal as the post-lockdown euphoria is ebbing
Without finding a cure for the health crisis, there is precious little that fiscal and monetary policies can sustainably achieve.
The RBI sees space for more policy easing with governor Shaktikanta Das candidly admitting in the policy press conference that the next move is likely to be a cut, with timing being the key uncertainty.
Discourse on RBI’s capital shows it is becoming sensitive to growth concerns.