Domestic demand will help sustain India's growth momentum as high-frequency data for June remained strong, with gains concentrated in services-led consumption, whilst data for industrial activity exhibited a mixed trend and external demand moderated further, Morgan Stanley said in its report.
Early trends for July indicate data holding across sectors with mobility fairly steady and unemployment levels lower than in the previous month. Credit growth continues to rise. It has reached its highest level since April 2019. CPI remained stable at 7 percent year-on-year in June, similar to May's levels, in line with our estimate.
Global commodity prices have moderated and high-frequency food prices have increased at a softer-than expected pace. The moderation in commodity prices has brought a respite to rising WPI inflation, which moderated a tad in June, to 15.2 percent year-on-year, with monthly sequential rise being the slowest in six months. Trade deficit made another high but is likely to moderate gradually: The trade deficit widened to an all-time high of USD 25.6 billion in June, averaging USD20.7 billion in CYTD 2022. On a three month annualised basis, the trade deficit has widened to 8.7 percent of GDP, while the trade deficit ex oil is tracking at 4.3 percent of GDP in June, Morgan Stanley said.
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