Mumbai: RBI Deputy Governor Poonam Gupta Wednesday said there is no “systematic bias” in the central bank’s inflation forecasting.
In comments that come amid concerns in some quarters on this aspect, Gupta said the central bank uses a variety of models and expert discussions to arrive at its inflation forecasts and added that estimates going wrong is a “global phenomenon”.
The central bank is also looking to come out with data on balance of payments, a key indicator of the country’s external position, on a monthly basis, against the present system of sharing the developments on a quarterly basis, Gupta remarked amid massive shifts in global trade policies.
It can be noted that concerns over inflation forecasting stem from an overestimation of the number, which, critics argue, prevented the RBI from cutting rates further in the last few months.
A rate cut would have been helpful for the economy and possibly lessened the impact of the US tariffs, they contended.
“While minimising the forecast errors is equally important, there is no systematic bias in the forecast. It is not that the forecast is biased in any particular way,” Gupta said, speaking at an event organised by the Ministry of Statistics and Programme Implementation here.
Acknowledging the critical reporting on inflation forecasting, Gupta said it is “fun” to read articles in the media, which are “perhaps not kind”, but made it clear that the RBI takes the views very seriously.
Citing her interactions with colleagues in the RBI’s monetary policy department (MPD), Gupta said every estimate has the risk of forecast errors, and there is not a single forecaster who gets it right all the time and went on to term it a “global phenomenon”.
The RBI follows a multifaceted approach to forecast inflation, including deploying proven models, using historical patterns, surveys, and stakeholder consultations, including from ministries and analysts, she pointed out.
Gupta also said that the upcoming revisions from MoSPI on the consumer price inflation (CPI) will be helpful to the Reserve Bank of India.
Meanwhile, on the issue of BoP data, Gupta said the RBI has already reduced the lag, by which the quarterly data is released within 60 days from the earlier 90 days and will also be looking at other improvements.
The RBI is trying to reduce the lag further, and also looking to have monthly releases, which may not be as granular as the quarterly ones, she said, choosing not to give a timeline by when it will deliver on the promise.
“We are working on the monthly (data release), the rationale is to give better and more data,” she told reporters later.
She added that the monthly BoP data will come before the further reduction in the time lag on the quarterly data.
Pointing to the changing dynamics in financial intermediation, where the role played by banks is reducing, Gupta said the flow of financial resources, data capturing movement of funds across banks, non-banks, external commercial borrowings and also foreign investments will be made into a monthly feature now on.
PTI
