RBI review to improve inflation, data on food distribution and online taxi aggregators also included

New Delhi| RBI Governor Sanjay Malhotra has initiated a review of all means to reduce the mistakes in inflation and growth forecasting. He has held several meetings with his team to find out whether there is any mistake in the earlier estimates being made.

The December Monetary Policy Committee meeting improved the 2024-25 growth figure from 7.2 percent to 6.6 percent. Inflation estimates were raised from 4.5 to 4.8 per cent. The government’s estimate became even lower than that. This was after the country’s gross domestic product (GDP) growth had unexpectedly fallen to 5.4 per cent in the July-September quarter. Inflation rose again in November.

According to sources, the means and methods of old estimates have been reviewed to be continued, or withdrawn. Malhotra, who took charge in December, has also asked RBI internal teams to include new datasets, analyzes and projections in inflation and growth forecasts. The review comes amid growing scrutiny of the central bank’s growth and inflation projections, which have remained off target for most of the current fiscal year. Especially the growth estimates have been much weaker than expected and inflation has exceeded the target.

Sources said, RBI will consider increasing the necessary dataset to better measure income and expenditure trends. For this, data on small digital payment trends as well as food distribution apps and online taxi aggregators may also be included. Details of various components of fuel use can also be added to assess retail and industrial activity.

Plan to curb
Malhotra works more on statistics. Now he wants to curb RBI’s forecasting mistakes on both inflation and growth. RBI wants to expand the data collected on the informal economy, which may lead to mistakes in accurate estimates at present.

Also support for unstable items like food
Improving inflation projections will involve the use of machine learning tools to prevent price fluctuations in volatile commodities such as food. RBI forecasts on inflation generally go wrong as food prices are quite volatile. RBI depends on wholesale market data, which leads to mistakes. The impact of whatever changes will be made can be seen in the policy estimates of February.