DBS economist Radhika Rao expects India\u2019s June CPI inflation to edge up to 4.1% YoY from 3.9%, driven by food normalisation and fuel-cost pass-through. She sees limited upside risks to core inflation, an improving but uneven southwest monsoon, and the June trade deficit remaining elevated near USD 28.5 billion despite the recent oil-price correction.<\/p>\n
Mild CPI rise and trade deficit<\/p>\n
“June CPI inflation is expected to rise marginally to 4.1% yoy from 3.9% the month before, on continued normalisation in food segments and passthrough of fuel costs through the related segments.”<\/p>\n
“Beyond food and fuel, upside risks to core inflation appear limited, amid softer gold<\/a> as well as precious metal prices and little scope for further pump<\/a> price adjustments.”<\/p>\n “Markets are also focused on the spatial and geographical spread of ongoing southwest monsoon.”<\/p>\n “Encouragingly, the nationwide rainfall shortfall has narrowed considerably into July to -15% (as of 8 July), from over 40% gap in end-June, with key crop-producing belts of central and northwest India witnessing improvements.”<\/p>\n “June trade data are unlikely to fully capture the impact of the mid-month correction in oil prices, with the trade deficit expected to remain elevated at around $28.5bn.”<\/p>\n