Some expectations are that the government, if able to retain power after the vote of confidence, may put economic reforms on the fast track. Over the last four years, Left parities had stalled privatisation of state-run firms, pension reforms, higher foreign limits in insurance and more liberal norms for foreign bank. The government is holding a two-day special session of parliament on 21 July 2008 and 22 July 2008 to seek vote of confidence after it was reduced to minority following withdrawal of support by Left parties on 8 July 2008. The government hopes to retain power due to backing from Samajwadi Party, a regional party in Uttar Pradesh.
The Q1 results season is on. The overall earnings of the corporate sector are seen rising about 15% in Q1 June 2008 over Q1 June 2007. That would be well below the 20-25% growth seen over the past few years.
Capping inflation has been a major priority for India’s central bank. Inflation based on the wholesale price index rose 11.91% in 12 months to 5 July 2008, just above the previous week's annual rise of 11.89%, government data released on 17 July 2008, showed. It is the highest reading since annual numbers in the current series became available in April 1995. The prices of crude, which touched a record high, had forced the Indian government to raise the fuel prices in the first week of June, adding to already rising inflation.
Reserve Bank of India on 24 June had hiked both repo rates and cash reserve ratio by 50 basis points each to tame rising inflation. There are expectations of further monetary tightening in quarterly monetary policy review of RBI scheduled on 29 July 2008.
Industrial production rose 3.8% in May 2008, much lower than revised 6.2% growth in April 2008, the government data released on Friday, 11 July 2008, showed. Industrial production growth for April 2008 revised downwards to 6.2% from earlier 7%.
Despite recent sharp fall, crude oil is still up about 35% in calendar 2008 so far. Being oil dependent economy importing more than 70% of oil imports any increase in oil prices worsens the balance of payment position of the country. Global rating agency Fitch Ratings, on 15 July 2008, lowered India's domestic currency rating outlook to negative from stable due to the central government's worsening fiscal position.
Foreign institutional investors (FIIs) sold shares worth Rs 2,771.50 crore in the month of July 2008 so far, till 16 July 2008. FIIs sold shares worth Rs 28,236.80 crore in the calendar year 2008. Mutual funds have bought shares worth Rs 511.80 crore in the month of July 2008 so far, till 16 July 2008.