CPI inflation likely to be at 3.2% in August: Morgan Stanley

Mumbai: Consumer price index-based inflation is likely to record a rise to 3.2 percent in August, driven by increases in food and oil prices, global brokerage Morgan Stanley said in a report.

CPI inflation stood at 2.4 percent in July.

At the same time, stronger food and oil prices are also expected to accelerate wholesale price index (WPI) index to 2.9 percent in August from 1.9 percent in July, the global brokerage said in the report.

"As base effects waned, we estimate food inflation of 1.7 percent year-on-year in August as compared to (-) 0.3 percent year-on-year in July, which would mark the first positive year-on-year growth print after 3 months of deflation in food prices," Morgan Stanley said.

"Inflation excluding food and fuel should likely remained sticky at 4.1 percent year-on-year as the impact of the rent house allowance continued to feed through," it added.

Further, the report estimates that the country's current account deficit would widen to USD 11.2 billion (1.9 percent of GDP) for April-June quarter 2017 from USD 3.5 billion (0.6 percent of GDP) in the preceding quarter.

However, it noted that CAD would still remain within the central bank's comfort zone.

Going by Morgan Stanley estimates, the trade deficit is expected to narrow to about USD 10.3 billion in August from USD 11.5 billion in July, driven by seasonal factors.

"With higher oil prices and unfavourable base effects, we expect a moderation in both export and import growth on year-on-year basis," the report said.