The curious case of RBI's inflation projections

Summary: The MPC meet just went by, and as expected, RBI kept the repo rate unchanged. Most media coverage touted it as a measured, calibrated move. But we came across a LinkedIn post that pointed out something curious – if not downright bizarre – in RBI’s inflation forecasts. Every few months, the Reserve Bank of India’s Monetary Policy Committee (MPC) meets and the script kicks in. Press releases fly, news anchors scramble, economists nod thoughtfully. But for most of us, life goes on. The EMI doesn’t change overnight, tomatoes still cost a fortune, and the official jargon? It usually sounds more or less the same. But once in a while, someone looks closely and spots something odd. Sridhar Sivaram (Investment Director at Enam Holdings) did just that in a LinkedIn post that’s quietly doing the rounds. He pointed out something strange in the RBI’s inflation forecasts. In a recent post, Sivaram questions the very core of the RBI’s forward guidance. And no, it’s not just armchair criticism. He backs it up with data that might make the central bank’s inflation forecasters squirm in their cubicles. Let’s start with a simple story of moving targets In April 2025, the RBI projected Q2 inflation (July–Sept) at 3.9 per cent. By June, they revised it down to 3.4 per cent. Now, in August, the pr