No Bias in RBI’s Inflation Forecast: RBI Dy Governer
Gupta says inflation prediction errors are natural during uncertainty
Mumbai: There is no systematic bias in the Reserve Bank of India’s (RBI) inflation forecasts, said its deputy governor, Poonam Gupta, on Wednesday, even as she asserted that any forecasting exercise, by its very nature, runs the risk of incurring errors.
Gupta, who is in charge of the monetary policy department, also said the central bank, which is the repository of all key macro-data from the monetary and fiscal angles, is planning to offer monthly balance of payments data for more timely insights into the nation’s external position amidst global trade uncertainties.
Speaking at a ‘Pre-release consultative workshop on base revision of consumer price index, gross domestic product and the index of industrial production’, Gupta said, “Any forecasting exercise, by its very nature, has the risk of incurring forecast errors. Such errors are a common feature around the world. These are generally larger when there are unpredictable shocks or events and are larger when one is predicting far ahead into the future.”
Gupta’s remarks come in the backdrop of the central bank revising downwards its retail inflation projection thrice in its bi-monthly monetary policy reviews this year so far.
Gupta said that research has shown that variance across forecasters tends to increase during periods of uncertainty. “Inflation forecasting is equally challenging in India, if not more so, given the high and outdated weight of food in the CPI basket and the volatile nature of food prices.”
The deputy governor also emphasized that India’s statistical ecosystem must now evolve in step with the pace of economic transformation. “The Indian economy has been a high-growth economy that has exhibited both resilience and agility. Our statistical offerings, data and techniques must keep pace with an economy that is growing and evolving rapidly.
Regularly updating and revising the existing data series, as well as constructing new ones, is essential to capture ongoing transformations.”
The workshop was chaired by Mahendra Dev, the chairman of the Economic Advisory Council to the Prime Minister, along with Saurabh Garg, secretary in the Statistics and Programme Implementation Ministry.