Economic indicators like PMIs, vehicle sales and steel demand suggest that growth momentum in India has gathered pace in December, says a report. However, prices are also on an uptrend with retail inflation likely to have firmed up further to 5.4 per cent in December owing to a lower base of comparison, the report by Morgan Stanley said. According to the global financial services major, economic indicators like PMIs, sales of commercial vehicles, steel and cement demand have accelerated on a sequential basis suggesting an uptick in the overall economy. “Recent high frequency growth indicators suggest that the growth momentum has gathered pace in December,” Morgan Stanley said in a research note adding trade data is also expected to mirror this strength – with both exports and imports growth holding up well.
On prices, the report said food prices have come off sequentially, largely driven by a seasonal dip in vegetable prices but an unfavourable base of comparison means that food inflation would still be higher at 5.4 per cent YoY in December versus 4.4 per cent YoY in November. As per the report, WPI inflation is likely to rise to 3.9 per cent year-on-year in December from 3.7 per cent (YoY) in November. Meanwhile, trade deficit is likely to have improved slightly in December, reaching around $13.3 billion.
As per the report, exports continued to stay strong, growing at double digit levels of 23.2 per cent year-on-year in December. While, import growth is expected to have accelerated to 25.5 per cent YoY, on the back of favourable base effect and robust consumption trends in the month. Morgan Stanley expects industrial production to have improved to 3.2 per cent year-on-year in November from 2.2 per cent in October.