India's economy recovering faster than expected, says Oxford Economics

Moody's Investors Service says that the recovery is patchy, meaning it is recovering in some areas but not all
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Representational Image

New Delhi: According to the global forecasting firm, Oxford Economics, the Indian economy is recovering faster than expected and the Reserve Bank of India is likely to have come to an end of the rate easing cycle. It said that inflation is expected to be 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.

The global forecasting firm said that the consumer inflation rose back to pre-virus highs in the month of October, with almost every broad category experiencing a rise in prices except for fuel. "While the fourth quarter is likely to mark the peak for inflation, we have turned more cautious on the trajectory over 2021," the firm further added.

What pushed up the retail inflation to a nearly six-and-a-half year high of 7.61 per cent in October is the costlier vegetables and eggs. This has helped in keeping the retail inflation significantly above the comfort zone of the Reserve Bank. Retail inflation stood at 7.27 per cent in September 2020, said the firm.

"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," said Oxford Economics.

Moody's Investors Service, which provides international financial research on bonds issued by the government and commercial entities has 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 nationwide lockdown. It also added that the recovery is patchy, meaning it is recovering in some areas but not all.

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