India: CPI inflation likely to rise to 4.7% in May - Nomura

Analysts at Nomura expect India’s CPI inflation to rise to 4.7% y-o-y in May from 4.6% in April, driven primarily by higher food and fuel (kerosene and LPG) inflation.

Key Quotes

“Core inflation (CPI ex- food and beverage, fuel) is likely to remain elevated at 6% y-o-y from the near-four-year high of 6.1% in April due to strong domestic demand. We expect industrial production growth to recover to 7% y-o-y in April from 4.4% in March, with strong growth in the capital goods, infrastructure goods and consumer durables sectors – all indicative of the ongoing cyclical recovery in investment and consumption demand.”

“On trade, exports remain constrained due to delayed GST refunds, but strong base effects will push up year-on-year growth to 12% in May from 5.2% in April. Imports are likely to rise due to higher oil prices, but we expect the trade deficit to be largely unchanged at USD13.8bn.”