India Monthly Data Outlook: May 2015

　　We expect CPI prices to rise 0.4% m/m, sa in April – as they did inMarch – causing year-on-year CPI inflation to moderate to 4.9% oya inApril from 5.2% oya in March. After having remained benign forseveral months, food prices began to firm at the end of April, but forthe month as a whole, they are still expected to contract sequentially –on a seasonally-adjusted basis – compared to March. That said, foodprices continue to tick up in early May. The other help to headline CPIin April was a fuel price cut at the pump at the end of March. Thosedynamics, too, will reverse in May with the pump prices being hiked onthe back of firming oil prices over the last few weeks.

　　We continue to expect WPI to be stay in deflation with April WPIexpected to print at -2.7% oya versus -2.3% oya in March. Thecontinued year-on-year deflation in the WPI is unsurprising given thatthe index has a much larger tradable component, and therefore reflectsthe sharp disinflation in global commodities over the last few months.

　　After unexpectedly surging in March, the merchandise trade deficit isexpected to moderate in April, but only modestly to about $11 bn from$11.7 bn in March. The deficit is expected to be pressured by asequential moderation in exports -- pay back to the typical seasonalbounce in March. Offsetting these dynamics should be lower oil importvalues (which typically reflect oil prices with a lag ) and a modest tickdownin gold imports from the elevated levels in March. However, thelevel of gold imports is still expected to be relatively high. That said, amonthly trade-deficit run-rate of about $11 bn is consistent with anannual current account deficit of about 1.2% of GDP, and is thereforenot threatening in level terms.

　　IP appears poised to grow sequentially for a third successive month inMarch, though the momentum is expected to be tepid and is pegged togrow around 0.2% m/m, sa – the same monthly sequential momentumas February. If our forecast holds, this should translate into year-onyearIP moderating to 3.8% oya from 5% in February. A key driver ofthe sequential acceleration in March is expected to be solid mininggrowth, as revealed in the core IP data. All that said, IP’s relevance hasreduced given its lower weightage in the revised GDP methodology.