Mumbai: India had trouble collecting economic data during a more than two-month nationwide lockdown, but as it resumes publishing key numbers, a familiar concern is resurfacing — that of credibility.
Economists, including State Bank of India’s Soumya Kanti Ghosh, aren’t buying the Statistics Department’s methodology for calculating consumer price inflation numbers for April and May, which take into account prices of services that became immaterial during the lockdown that began March 25.
Data published by the government this week showed retail inflation in June at 6.09% — above the upper end of the Reserve Bank of India’s 2%-6% target band. In the same statement, the statistics office imputed data for April and May that showed consumer-price growth was well above 6%.
“With lockdowns, the fixed basket on which inflation is calculated is totally irrelevant as many of those typical items, particularly services, are no longer available or have a disappearing product problem,” said Ghosh, chief economist at SBI.
This isn’t the first time India’s official statistics have come under scrutiny. Last year, a former chief economic adviser to Prime Minister Narendra Modi questioned changes to the way the gross domestic product is measured and said annual economic growth numbers might have been overstated.
According to SBI’s Ghosh, the share of products within the services category with missing prices in the headline index was 22.4% in April as imputed by the statistics office. “Hence extrapolating price trends of the overall CPI basket which were largely driven by food and fuel sub-groups to key core components such as clothing, footwear, etc. by the National Statistical Office is puzzling and incorrect,” he said.
The inflation report misses details, says Kaushik Das, chief India economist at Deutsche Bank AG in Mumbai.
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“The problem is that the Statistics Office has not given the details of the sub-components that make up ‘transport and communication’ since March,” Das said.
The central bank’s preferred core inflation measure, excluding transport and communication inflation, yields an underlying inflation rate of 4.4% year-on-year in June. Excluding gold, the rate falls further to 3.5% in June from 3.8% in May, 3.7% in April, according to Das’s estimates.
“While an August rate cut looks touch and go, we still believe RBI could be looking through the CPI numbers through the cycle and not at a point in the cycle,” Ghosh said.- Bloomberg
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