The retail inflation based on the Consumer Price Index (CPI) jumped to a three-month high of 6.52% in January, according to the data released on Monday.
Economists estimate that the reading for January may be around 6.3%, still higher than the Reserve Bank of India‘s upper tolerance limit of 6%.
“There appears to be some data anomaly in the cereals index for January,” said a note from Kotak Institutional Equities.
“If this data print were to undergo revisions, the cereal index’s sequential momentum would be around 0.8%, leading to food and beverage inflation at 5.75%, compared to 6.19% as per the official release,” the note added. “Consequently, the headline CPI print would stand corrected at 6.29% – 23 bps lower than the official release.”
Cereals and products recorded 16.1% in January and a 2.6% rise sequentially over December.
“Using official data, we find a wide divergence between the headline cereal index and its subcomponents,” said Sonal Varma and Aurodeep Nandi, economists from Nomura.
The cereal index comprises 20 subcomponents, which record market prices of rice, wheat, their prices at Public Distribution System (PDS), and market prices of jowar, bajra, etc.
“If the subcomponent estimates are right, then headline inflation is overestimated by 0.23pp. If the headline cereal index is right, then the bottom-up numbers need to be revised higher,” Varma and Nandi said.
“Estimated cereals CPI (calculated using a weighted average of all cereal group subcomponents) was markedly different from the actual printed cereal CPI number, the first such divergence since the series started,” said Rahul Bajoria, MD & head of EM Asia (ex-China) economics, Barclays.
Wholesale inflation data released on Tuesday showed a 15.5% inflation in cereals but a lower sequential rise in January than retail inflation for cereal products.
“We note that cereals WPI rose 1.7% in January, compared with a 2.6% increase in the cereals CPI, which drove a significant part of the surprise in the latter. This was despite expectations of a drop in PDS rice and wheat prices due to the government’s NFSA scheme,” Bajoria added.
It may be one of the factors contributing to data anomaly.
Queries sent to the ministry of statistics and programme implementation that releases the retail inflation data did not elicit a response until press time.