RBI’s big inflation misses put India’s forecasts under scrutiny

The Reserve Bank of India’s inflation forecasting model is coming under increasing scrutiny from economists after the central bank consistently overestimated price pressures this year, contributing to a hawkish policy approach.

The central bank’s inflation miss in the first three months of the year was 0.7 percentage points — the biggest gap in almost six years, and well above economists’ projections. Estimates in the subsequent two quarters have also been off the mark, by smaller margins of 0.2 points and 0.1 points, respectively.

Economists predict another big miss in the current quarter after a surprisingly low inflation print in October. That means the RBI’s projection of 2.6% for the fiscal year through March, published as recently as in October, is already looking out of date. UBS