The GBP/INR exchange rate has trended between 96.0749 and 97.4431 during the past seven days.
The top economic advisor to Indian Prime Minister Narendra Modi, Arvind Panagariya, has claimed that the slowdown in China offers an opportunity for India, rather than a threat. India and China’s economies were level in 1980, but since then China has grown over five times more than India with a current GDP of US$10 trillion. The country positioned itself as a manufacturing hub, resulting in high demand from businesses in developing countries, who saw an opportunity to outsource their production and capitalise on lower costs.
As the Chinese government tries to steer the country’s economy towards becoming more reliant on services other than manufacturing, Panagariya believes there is an opportunity for India to become the world’s new manufacturing hub as corporations look for a new low-cost base for their operations.
‘Many pessimists think that manufacturing is now passé, that the robots are coming, 3D printing is coming. None of those factors is going to be a barrier to India becoming a manufacturing hub right now,’ Panagariya claims.
The Rupee (INR) has also been strengthened by the International Monetary Fund’s (IMF) continued faith in the economy. While the IMF has cut global growth forecasts and downgraded the economic outlook of the US by -0.2%, its forecast for India remains unchanged at 7.3% in 2016, rising to 7.5% for 2017 and 2018.
Pound Sterling (GBP) has been weakened by comments from Bank of England (BoE) Governor Mark Carney, who has claimed that ‘now is not yet the time to raise interest rates’. Citing worsening global conditions and weak UK growth, the Governor has stated that he will need to see evidence of consistent economic growth, a rise in domestic cost pressures and inflation moving towards the 2% target. While a few still held out hopes of action by the BoE in the first quarter of the year, Carney’s comments have reinforced the general sentiment in the market that a rate hike won’t come until the beginning of 2017 at the earliest.
Tomorrow sees labour market data for the UK released, including Average Weekly Earnings figures that are seen as one of the key indicators of economic strength. The BoE will be looking for significant increases, however the data for the three months to November is expected to show a slowdown in wage growth to 2.1%. Public Sector finance figures are due out on Friday and will give a greater indication of how well George Osborne is faring in his attempt to keep the deficit under control.
Foreign Reserves, Deposit Growth and Bank Loan Growth figures for India will also be released on Friday.