Retail inflation magnified? RBI cites NSO methodology

Various analysts had earlier doubted the accuracy of retail price inflation because of "overestimation" of the rate of price rise in cereals in January and February this year. The Reserve Bank of India (RBI) in its recent paper attempted to provide an answer to this anomaly.

- INDIVJAL DHASMANA

There were differences between the figures arrived at by the National Statistical Office (NSO) and analysts due to the way the NSO aggregates data from the item level upwards to the numbers at the national level.

The paper, put out in the latest RBI Bulletin, called for a change in the aggregation method to make CPI data more useful for monetary and other policies. It also urged for an expeditious revision of the base year of the consumer price index from 2012, to guide the monetary policy correctly.

The overall CPI inflation rose to 6.52 per cent in January this year from 5.72 per cent in December last year, and then came down slightly to 6.44 per cent in February, 2023. Within that, cereal inflation rose to 16.2 per cent from 13.79 per cent and again went up further to 16.73 per cent in these months.

Aggregation of price indices in the CPI to arrive at the headline all-India index published by the NSO is done in two stages, the paper pointed out.