Two ongoing macroeconomic themes fortified – one that of CPI inflation having peaked, and growth continuing to remain fairly resilient despite global headwinds.
Download ReportJul-22 CPI and Jun-22 IIP - A tale of two 'downs'
The latest prints of CPI and IIP reinforce two ongoing macroeconomic themes further – one that of CPI inflation having peaked, and growth continuing to remain fairly resilient despite global headwinds. After remaining above 7.0% in each of the months in Q1, CPI inflation at 6.71% in Jul-22 was definitely a breather – but not a decisive inflexion point to us. Readings for Aug-Sep-22 could see some upside amidst an unfavourable base, uneven monsoon distribution and GST rate hike impact coming on board fully. In comparison, Q3FY23 should have more to offer – with inflation trajectory displaying a strong kink as we project CPI slipping below 6.0% by the end of the calendar year. This comfort on inflation, is likely to stand negated by downside in domestic growth owing to global dynamics (tighter financial conditions and aggressive rate hikes). While we retain our FY23 GDP growth at 7.0%, we now attach downside risks to it. A manifestation of these global risks could see quarterly GDP growth slipping below 4.0% in H2 FY23 on an annualised basis. Given this inflation-growth mix, we continue to expect RBI to hike incrementally by 50 bps by Dec-22.