After a five months consecutive surge in retail pricing, it has been anticipated that inflation will be restrained at 5 percent.
According to a report released by Morgan Stanley, this not only helped in vegetable prices, but also helped to reduce trade deficit that is also likely to improve, in January.
The report implies that food inflation will be reasonable on a year-on-year basis to 4.5 per cent from 5 per cent in December.
Also, it is expected that the trade deficit has improved from a previous $14.9 billion to $12 billion in January due to a strong demand on a global scale.
According to the official data for consumer price inflation (CPI) for January, which stood at 5.2 per cent in December last, would be released by government on Monday.
Morgan Stanley sees the scenario to have ‘moderate risks to macro stability are emerging on account of the wider-than-targeted fiscal deficits’.
Morgan Stanley said in the report: “Against this backdrop, the attention on the incoming monthly data will likely be on the inflation and trade deficit prints.”
“We expect headline CPI inflation to moderate to 5 per cent year-on-year in January from 5.2 per cent in the previous month, after rising consecutively for five past months.”
“Exports likely continued to grow at double digits for the third consecutive month, supported by robust global demand and favourable base effects.”
“Non-oil, non-gold imports (proxy for domestic consumption) is expected to have stayed strong at 24.6 per cent versus 12.8 per cent as domestic demand indicators such as car and two-wheeler sales growth was strong in the month.”