India's Inflation Numbers May Be Lower Than Official Data, Says Report
Inflation falls by an average of 1.5 percentage points in the 12 months through March 2021 when the free food programme is accounted for, according to a report by Bloomberg Economics
Inflation numbers in India might be better than official data suggests once the massive impact of a government food programme is factored in, a report released Bloomberg Economics on Monday said.
According to the report by Bloomberg, “Our estimates show the RBI actually has nothing to explain, yet,” said the report, which found that inflation falls by an average of 1.5 percentage points in the 12 months through March 2021 when the free food programme is accounted for. “By this more accurate measure, the RBI has been in breach of its inflation mandate only since April, not January.”
The Reserve Bank of India (RBI), in line with rules set in 2016, is required to file an explanation with the Centre if inflation strays outside a 2-6 per cent target limit for more than three consecutive quarters.
The RBI called an unscheduled meeting this month to report on why it’s failed to keep the numbers down. Retail inflation accelerated to a five-month high in September, marking the third-straight quarter when price gains stayed above 6 per cent. But at a time when India’s central bank is facing criticism for raising rates too late, Bloomberg found that the RBI may have actually initiated its rate hike cycle earlier than required.
According to BE, failure to account for the food programme means that consumer price data has overestimated inflation since 2020, when the government started distributing supplies to help people during the pandemic. Between April 2020 and September 2022, BE estimates that the programme accounted for 22 per cent of the India’s total rice consumption and 14 per cent for wheat.
Meanwhile, India’s manufacturing activity expanded at a stronger pace in October as demand and output remained robust, encouraging companies to hire workers at the fastest pace in nearly three years, a private survey data revealed on Tuesday.
The Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 55.3 in October from September's 55.1, better than a Reuters poll median forecast for 54.9 and remaining above the 50-level separating growth from contraction for a sixteenth month.
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