Doubts raised over govt data credibility amid Covid-19

A State Bank of India research has questioned the government’s data credibility and said the extrapolation of certain macro-economic numbers due to non-availability of data in Covid-19-related lockdown has led to a “distortion” and “underreporting” of a crucial data on retail inflation, which forms the basis of setting interest rates by the RBI.

Disagreeing with the government’s retail inflation number of 6% in June, it said according to SBI computed numbers, it is actually nearing 7%.

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In such a volatile situation, it said the forthcoming monetary policy decision of the RBI will be a hard one to make and a rate cut in August looks difficult. The RBI’s next monetary policy on August 6.

“Due to non-availability of data, the index for the sub-groups, say for example ‘clothing & footwear’ group were imputed by simply using the last quoted price of the items and scaled up by the relative increase in CPI of the current month… However, this is a purely statistical exercise by NSO without even understanding the problem that distorts and even underreports the headline CPI,” the research report said Thursday.

It said, as per our SBI Computed Covid-19 CPI, the actual headline inflation in June is at 6.98%, almost 90 basis points higher than the imputed inflation of NSO.

With the onset of the Covid-19 pandemic, India along-with the majority of middle and low-income countries has been experiencing rising consumer prices.

“In the case of India, we believe that inflation will remain at elevated levels for the next few months due to supply-side constraints and labour shortage, rather than due to fiscal deficit and external factors, except crude. However, the situation is extremely volatile and uncertain and the previously published numbers can see revisions. In this context, the forthcoming MPC decision will be a hard one to make... To that extent, while an August rate cut looks difficult / touch and go…,” it said.