High inflation is a drag on economic growth in the world’s second most populous country and matters immensely to over 400 million people, or over a third of India’s total population, who struggle to earn enough to feed their families three meals a day.
The particularly volatile nature of inflation in India has confounded policymakers and small business owners and has left economists, who are often running complex statistical models based on a dearth of reliable data, with a poor forecasting record.
To be fair, predicting economic data can be pretty tough in a country where collecting and reporting national statistics is still in its infancy stage. Provisional numbers are often completely revised away.
The latest sharp revisions to historic gross domestic product data, which show that India’s economic performance during the aftermath of the global financial crisis was worse than previously thought, is just one recent example.
Economists have underestimated the pace of monthly wholesale inflation 17 times over the past two years, according to an analysis of Reuters polls.