1、M IdeaIndia Economics|Asia PacificEcoview:Easing Inflation;Calibrated Policy ResponseMorgan Stanley India Company Private LimitedUpasana ChachraChief India Economist Upasana.C +91 22 6118-2246 Bani GambhirEconomist Bani.G +91 22 6118-3027 Extel Global Fixed Income Poll is now open.We hope you have e

2、njoyed our research over the past year and appreciate your support.Request your ballot.Exhibit 1 :Tracking CPI and WPI2.1%4.5%-0.1%1.0%-5%-3%-1%1%3%5%7%9%Jan-23Feb-23Mar-23Apr-23May-23Jun-23Jul-23Aug-23Sep-23Oct-23Nov-23Dec-23Jan-24Feb-24Mar-24Apr-24May-24Jun-24Jul-24Aug-24Sep-24Oct-24Nov-24Dec-24Ja

3、n-25Feb-25Mar-25Apr-25May-25Jun-25YoY%Headline CPICore CPIHeadline WPICore WPI Source:CEIC,Morgan Stanley Research,Exhibit 2 :We expect CPI to average 3%YoY in F20261%2%3%4%5%6%7%8%9%Mar-19Jun-19Sep-19Dec-19Mar-20Jun-20Sep-20Dec-20Mar-21Jun-21Sep-21Dec-21Mar-22Jun-22Sep-22Dec-22Mar-23Jun-23Sep-23Dec

4、-23Mar-24Jun-24Sep-24Dec-24Mar-25Jun-25Sep-25Dec-25Mar-26YoY%Headline CPICore CPIMSeHeadline CPI target:4%Source:CEIC,Morgan Stanley Research,Morgan Stanley Research estimatesFast-paced moderation in incoming inflation data,alongside mixed data on growth,has reignited the debate around the potential

5、 of imminent policy easing.We maintain our outlook for a pause in Aug and expect one more cut in Oct policy,even though we note that risks of an Aug rate cut have risen.CPI inflation falling quickly:CPI inflation has been tracking below 4%since the beginning of the year,averaging 3.2%in 1HCY25 compa

6、red to 5%in 1HCY24.In June,CPI slowed to 2.1%YoY,the lowest since February 2019,with the Wholesale Price Index(WPI)entering mild deflation.This has led to a debate regarding low inflation,lacklustre demand,and potential policy response.Food prices lower,core ticking up at the margin:Food inflation h