Macro Shots - Imports from China - A Two-Sided Story by Sreejith Balasubramanian, Senior Economist, Bandhan AMC
Below the Macro Shots - Imports from China - A Two-Sided Story by Sreejith Balasubramanian, Senior Economist, Bandhan AMC
We have been writing about India’s rising core goods (non-oil-non-gold) imports, despite change in the overall trade deficit this year being modest due to lower oil impots and buoyant services surplus (see here, here and here). Core goods import from China has been rising, given China’s excess industrial capacity, overleverage and weak domestic demand, all of which could continue for some time.
China’s Producer Price Index (PPI) growth has been negative for 3+ years now. This seems to have a close correlation with India’s core WPI and core-goods CPI (figure below).
This set up negatively impacts India’s private investment cycle, which has been moderate. However, it exerts downward pressure on core inflation, which should allow the RBI to keep rates lower for longer.
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