India: Terms of Trade Pressure Eases and Constructive BOP Dynamics

India's macro outlook has improved due to falling global oil prices and a suite of government and central bank measures designed to bolster the Balance of Payments. These developments have shifted the central bank's stance toward an extended pause on interest rates.

Key Takeaways

• 1.Lower global oil prices are mitigating terms-of-trade pressures and improving India's current account outlook.
• 2.The RBI and Government of India have implemented various measures to boost capital inflows and support the BOP position.
• 3.Monsoon rainfall trends in July and August are critical for monitoring crop output and inflation risks.

Table of Contents

• OIL PRICES OFF THE BOIL
• REVISITING MACRO ASSUMPTIONS, CURRENT ACCOUNT RISKS EBB
• INFLATION RISKS – FUEL TO FOOD
• CAPITAL ACCOUNT GETS A HAND FROM RBI/GOI
• BOP implications
• FISCAL AND MARKET IMPLICATIONS

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