Last week the government announced the CPI inflation for June and the IIP growth for May. It also announced the trade deficit numbers for June this week. Here are the key takeaways.

· Inflation has moved marginally higher for June at 3.18% nearly 14 bps higher than the inflation in the month of May. Despite the steady uptrend over the last 5 months, inflation still remains within the RBI comfort zone of 4%. The rise in CPI inflation came from a sharp rise in food inflation which went up from 1.83% in May to 2.17% in June. This has been a consistent trend and is partially explained by the better MSP for farmers and partially by the base effect of last year. However, the good news is that the core inflation (excluding food and oil) continues to trend lower.

· IIP growth has continued to disappoint and that trend continues for the month of May. IIP for May 2019 came in at 3.1%, lower than the growth recorded in April and also the corresponding period last year. IIP growth saw pressure on mining and manufacturing, which accounts for 77% of the IIP basket. Weakness in manufacturing is largely due to low capacity utilization, weak global and local demand and liquidity stress across key sectors like auto and FMCG.

· Trade deficit for the month of June 2019 was marginally lower at $15.28 billion. However, the worry for the Indian growth story could be that exports were sharply down by 9.7% at $25 billion. This is a clear signal of pressure and consistent with the weak IIP growth signals.

The three above data points combined make a case for the RBI to cut rates when it meets in August. That could be positive for the markets.