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India jumps 30 places in ease of doing business ranking



Indian Economic Update


Key developments during the week:

  • Government of India appointed a panel led by FM, Mr. Arun Jaitley to oversee PSU bank consolidation.
  • India’s fiscal gap for April-September stood at 91.3% of budgeted target for FY2018, as receipts grew robustly while expenditure was trimmed.
  • India registered an impressive thirty places jump on the World Bank’s Ease of doing Business ranking. Significant improvement in “getting credit”, “protecting minority shareholders” and “resolving insolvency” indices led India to move to a rank of 100 in 2018 from the 130th position last year.



Global Update


US Fed policy: Maintains status quo

Fed maintains status quo on interest rates

In line with our expectations, the US Federal Reserve maintained the Fed funds rate target range at 1.00-1.25%. The statement was upbeat on recent economic growth. There were no dissenters.

Fed assessment of economic activity and labour market

The statement was largely same except that the Fed termed the economic growth ‘solid’ compared to ‘moderate’ in its earlier statement. Also, the central bank acknowledged the impact of hurricanes on the labour market as the payroll employment in September dropped. However, it highlighted the drop in unemployment rate which was 4.2% in September compared to 4.4% in August.

Fed assessment of inflation

The spike in headline inflation in September was largely on account of rise in gasoline prices. However, inflation for items other than food and energy remained soft. On a 12-month basis, both inflation measures have declined this year and are running below 2 percent.

Fed outlook – hurricanes’ impact transitory

The Fed maintained that the impact of hurricanes transitory. It said that they continue to impact economic activity, inflation and labour market in the near term, but they are unlikely to affect economy in the medium term. Regarding inflation, Fed continued to stick to its stance that it will be stabilised around the 2% target in the medium term even though it is expected to remain soft in the near term.


UK: BoE delivers a dovish hike

Bank of England (BoE) delivers 25 bps rate hike

  • Bank of England raised its key policy rate by 25bps to 0.50%, with a majority of 7-2.
  • Asset Purchase Facility (APF) kept unchanged at GBP 435 bn, voted 9-0.
  • With BoE reverting back to pre-Brexit levels on policy rate, we expect the central bank to go for a wait-watch mode for next few months and see how both economy and Brexit related talks unfold. In its recent forecasts, the central bank has assumed a “smooth Brexit”.


Other important developments during the week:

  • Bank of Japan maintained status quo in its monetary policy. The short-term interest rate and the 10-year JGB yield target were kept at -0.1% and 0% respectively. It has also kept unchanged its pledge to buy JGBs so that its holdings increase at annual pace of around JPY 80 tn.
  • US President, Mr. Trump formally nominated Fed Governor, Mr. Jerome Powell as the Chair of the Federal Reserve when the term of current Fed Chair, Ms. Yellen expires. Powell is considered to be neutral on the interest rate front and is seen as someone who would ease regulation for the banking sector.