KV Kamath, former ICICI bank chief, on February 27 raised concerns about the reliability of India’s inflation data and said that the economy needs to see a connection between inflation and interest rates.

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Kamath said he's increasingly disturbed that there is no reliable inflation data in India. "We need to understand, are we measuring it (inflation) right?.. One would need to look at CPI and other indicators, with more focus to understand in detail," he told CNBC-TV18 in an exclusive interaction.

Kamath cautioned that India should not end up in a situation that interest rates have increased too much and the economic growth engine is out of gear. India needs to grow in sync with the west, he said, adding that he has complete confidence in steps taken by the government and the Reserve Bank of India (RBI).

Kamath is not the only one to have red-flaggd the reliability of the inflation data, many economists have previously questioned it calling its projections under or over estimated.

An Economic Times report said, economists are now using online prices to construct price indexes on their own to avoid measurement biases that distort evidence of price stickiness.

In an opinion piece for ET, Group Chief Economic Advisor, State Bank of India, said headline inflation has consistently been overestimated over a long period by 70 basis points because of decade old Consumer Economic Survey (CES). According to him, even IIP growth is underestimated.

The major concern that he flagged is, data is not available beyond FY2012, which he said, effectively means CSO needs to finds suitable ways of rectifying the anomalies. He said, CSO had revised the base year of CPI to 2012 (from 2010=100) in January 2015 with methodological improvements in the new series.

Kamath, meanwhile, noted that central bank and government has managed the economic situation very well in last two years. The liquidity was kept easy and India did not tighten rates as much as peers.

"India is in a sweet spot...growth story will not derail; needs to be nurtured properly," Kamath said, adding that infrastructure should be the main focus area for growth.

First Published:Feb 27, 2023 11:26 AM IST