India: Inflation steady, trade deficit persists – DBS

DBS Group Research’s Econs team expects India’s July inflation to remain steady at 4.4% year-on-year, with core readings staying below 4% thanks to softer precious metals. Food staples show mixed trends, while fuel price adjustments may lift utilities and fuel components. Trade data are projected to reveal resilient exports but stronger imports, keeping the trade deficit near USD 29–30 billion.

Inflation and trade outlook

"Inflation and trade numbers are due in the second week of August. Headline inflation in July was largely steady at 4.4% yoy vs June."

"High frequency data on food staples point to a rise in pulses, sugar, milk and edible oils, while vegetables have stabilised. A catch-up in rainfall in July has helped boost sowing activity."

"Adjustments in domestic retail fuel products (non-subsidised LPG was up 10% yoy in Jul) are also likely to reflect in the utilities and fuel segments. Core readings, however, should be benign at sub-4% in July, helped also by moderation in precious metals in the period."

"Separately, trade numbers should see the resilience in exports outweighed by a higher import bill, keeping the trade balance in red to the tune of -$29bn, close to -$30bn in June."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)