India economy likely to recover gradually

India is scheduled to release its Q2 2015 GDP data on 31 August. 

"Headline GDP is likely to show growth of 7.8% y/y (Q1: 7.5% y/y). India continues to witness a gradual recovery and growth in gross value addition (GVA) is likely to have stayed rangebound in Q2. However, the sharp rise in 'net indirect tax' collection (reflecting higher excise charges, lower subsidies) will likely lead to a higher growth rate in headline GDP than in GVA. Therefore, GDP growth for FY 15-16 of 7.8% is expected, which would be better than the 7.3% in FY 14-15", says Barclays in a research note. 

Separately, inflation remains markedly weak. Wholesale price inflation (WPI), which registered a ninth consecutive negative print in July (-4.1% y/y), remains at the lowest levels for nearly four decades. FY 15-16 average CPI inflation of 5%, lower than the RBI's early-2016 target of 6%, estimates Barclays. 

The central bank is on course to deliver another 25bp repo rate cut in H2 2015, unless incoming macroeconomic data or financial market developments spring major negative surprises. On the balance of risks, a rate cut at the RBI's next meeting on 29 September is expected, while the risk of another inter-meeting cut cannot be completely ignored, adds Barclays.