Why RBI Gets It Wrong
The backward looking household survey does not capture the full picture, thus leading to elevated inflation projections and consequent policy error.
The reserve bank of India frequently cites a survey of household inflation expectations in its monetary policy statements to support its inflation projections. The underlying assumption is that the survey is a useful indicator of future inflation. But that is not the case. Our analysis shows that the household survey on inflation is backward looking. The central bank's reliance on these backward looking inflation surveys
