India's new central bank chief seeks to improve forecasts, sources say

India's new RBI governor initiates review of forecasting tools to minimize errors, including new datasets and analysis.

India's new central bank governor Sanjay Malhotra has initiated a review of the Reserve Bank of India's (RBI) inflation and growth forecasting tools to minimise projection errors, four sources said.

Mr. Malhotra, who took charge last month, is asking the RBI's internal teams to include new datasets, analysis and projections in their inflation and growth forecasts, sources aware of the central bank's thinking said.

None of the sources wished to be identified as they are not allowed to speak with the media. The RBI did not immediately respond to a Reuters' email seeking comment.

The review comes amid increased scrutiny on the central bank's growth and inflation estimates, which have been off the mark for much of the current fiscal year, with growth on track to be much weaker than expected and inflation higher.

At the December policy meeting, the RBI cut its growth forecast sharply to 6.6% from 7.2% for 2024-25, while retail inflation projections were raised upwards to 4.8% versus 4.5% earlier.

This was after India's gross domestic product growth fell unexpectedly to 5.4% in the July-September quarter, its slowest in seven quarters, while inflation quickened again in November.

On Tuesday, the government forecast annual growth of 6.4% in the fiscal year ending in March, the slowest in four years and below the RBI's projections of 6.6%, weighed by weaker investment and manufacturing.