India Economics:Macro data round-up –domestic demand remains healthy

Trade deficit widens to a 56-month high: The trade deficit widened toUS$16.3bn (8.1% of GDP annualised) in Jan from US$14.8bn (7.4% of GDPannualised) in Dec as imports rose faster than exports. The higher than expectedtrade deficit in Jan puts upward pressure on the current account deficit forFY18 – we expect the CAD to widen to 1.8-2% of GDP vs. our earlier estimateof 1.6% of GDP in FY18.

Inflation moderated in Jan, but CPI still above the 5% mark: Jan CPImoderated to 5.1% (5.2% in Dec) with food prices decelerating. Jan WPIinflation decelerated to 2.8% from 3.6% in Dec, with both food and non-foodsegments moderating.

Gradual recovery keeping macro stability in check: We expect the growthrecovery to gradually gather pace, and we expect GDP growth at 7.2% inFY19e from 6.7% in FY18e. We expect consumption, public capex andexports to be the main drivers even as private capex remains in repair mode.

Inflation is expected to edge higher until Jun-18, partly due to a low base.

We expect the RBI to take into the account the idiosyncratic factors impactinginflation and a still-nascent growth recovery, which should keep the centralbank on hold. Pls see the following pages for heat map tables and charts.