India's headline CPI inflation in July predicted to slightly increase to 7.9% YoY

Inflation likely up on higher vegetable prices.

Inflation in India in July has been predicted to be likely up on higher fruits and vegetable prices, as official numbers are awaited.

According to a research report from DBS, headline CPI inflation in July is seen at 7.9% YoY, from June's 7.3%.

Meanwhile, WPI inflation is seen at 5.5% from June's 5.4%.

High frequency data show that vegetable prices (average of three widely used varieties) were up 25% on the year in July.

In contrast, rice prices have been flat even as government's excess stocks are still to be off-loaded.

These factors are likely to life the food inflation index back above 9.5% from 7.9% the month before.

This rebound is a combination of seasonal upturn and inadequate supplies, piling pressure on the government to expedite measures to address supply-side shocks.

Here’s more from DBS:

July trade deficit is likely to stay wide at circa USD 11bn on the bank of gradual pick-up in non-oil import demand.

Base effects will also prop headline import growth, while exports stabilise on nominal terms.

Nonetheless, the year-to-date built up in the trade deficit in the Jun14 quarter is the narrowest in the past three years, suggesting upside risks to the current account shortgall remain subdued.

June industrial production is expected to moderate to 4.0% YoY from May’s 4.7%, despite pick-up in sequential month-on-month terms.

Spurt in the core industries index to 7.2% was influenced by favourable base effects, with the same factor to lift electricity generation up a sharp 15.6% YoY in June.

Mining and manufacturing sectors growth should also benefit from negative readings in the comparable period last year.

Nonetheless, stable export demand should boost the manufacturing sector this year, until consumption demand recovers in the second half.

Passenger vehicle sales continued to contract in the Jun quarter, along with subdued demand for commercial vehicles.