RBI core inflation transparency draws scrutiny

That matters because core inflation is one of the RBI’s main gauges for judging underlying price momentum once food is stripped out. In the new series, a writer cited in the RBI’s August policy minutes says the core inflation estimate still comes out at 3.85% in July and 3.90% in June, broadly matching the central bank’s own published figure, but only after using an Expert Group annexure, e-Sankhyiki portal data and a netting exercise that the RBI and MoSPI have not fully documented.

For markets, the problem is less about the precise July number than about the credibility and comparability of the policy signal. When the RBI cites diffusion data showing 69% of the basket by weight had inflation of 4% or less in June 2026, it is trying to argue that inflation is not generalized. But with only about seven months of comparable data under the new 2024 series, it is hard to know whether that share is high or low, or whether it should carry the same policy weight as in older CPI vintages.

The challenge also cuts into a more basic macro read: fuel inflation is now split across multiple categories, while services and other components are harder to isolate cleanly. That makes headline-to-core comparisons less straightforward and leaves investors with a softer read-through on the RBI’s reaction function, especially if the central bank continues to emphasize diffusion and core trends in coming meetings.

MoSPI could ease that uncertainty by publishing class and sub-class weights with each monthly release and by releasing a documented all-India core index alongside headline CPI. Until then, the RBI’s inflation debate is likely to remain partly opaque, leaving bond traders and rate-cut watchers to rely on an index they cannot fully reproduce.