India: CPI inflation is expected to continue to normalize - TDS

Analysts at TDS suggest that India’s August CPI inflation is expected to continue to normalize after touching a record-low of 1.5% Y/Y in June.

Key Quotes

“The consensus expects an upward move to 3.3% Y/Y, up from the prior 2.4%. Although optically this looks like a sharp 0.9ppt bump up, if expectations are accurate inflation will still remain quite close to the low point in the series, still sufficiently below the 4% target, and well within the 2-6% fluctuation band.”

“Recent GDP data confirmed that domestic demand is weak, which means the inflation drivers will primarily be base effects and resurgent food inflation on the heels of a normal but uneven monsoon, which has caused way too abundant precipitations in parts of the country. Fuel prices (petrol and diesel), now better reflecting crude oil price fluctuations, and government sponsored house rent allowances are also expected to contribute to CPI pressure today.”