The government, desperate for a rate cut, may be hoping that a softer CPI food price will prompt the RBI to take a favourable decision sooner.But the fact is that if this is indeed a government trick to force a rate cut, it is also risking the credibility of government data.<br /><br />

Serious questions have been raised about the credibility of the government's data. Not only experts, even the Reserve Bank of India has raised doubts.

Foremost among such data is the industrial output data. The index that measures the factory output has remained so volatile that nobody now attaches any credibility to it.

"Sharp volatility in IIP data is a problem. We need to understand what's leading to data volatility as it may lead to policy miscalculations," former RBI governor D Subbarao had said once.

The mystery surrounding the data has only aggravated. Firspost's R Jagannthan termed the data for July as freaky. Read here.

Then there is wholesale price index-based inflation, which looks like a piece of art. Even while you pay high prices for everything from vegetable to cereals in the market, the WPI data says inflation is low in the country.

In order to address this, the government introduced consumer price index-based inflation. CPI is supposed to be closer to reality, because it takes into account the retail prices of items, not the wholesale ones.

But the two sets of data seem to have only added to the confusion. This is because both of them give out widely divergent data making it difficult to get a clear picture about the price situation in the country.

"Regardless of the reasons, the large magnitude of the short-term divergence between the two indices poses a major challenge for assessing inflation dynamics in the short-term," Subbarao had said recently.

The trend in inflation data for August is also no different.

The government data showed that CPI inflation is August stood at 9.52 percent, while WPI was at 6.1 percent. The CPI witnessed a decline on month while WPI a rise.

Core inflation based on WPI in August has fallen to 1.9 percent, said Crisil Research.

"The fall in core inflation is the impact of weak demand, despite some pass-through of the sharp increases in input costs into final products to cushion margins," it said.

The rating agency has also revised its WPI inflation target for this year to 6.2 percent from 5.3 percent.

Coming back to the variance in CPI and WPI inflation data, this time round the difference is more appalling. This is because it is the food inflation that is sending confusing signals.

"Has the government's statistical office erred with data collection relating to food prices, either by chance or design, for calculating the two inflation indices?" asks a report in the Times of India.

According to the report, the recent data shows that food inflation on WPI rose to 18.2 percent in August from 9.3 percent a year ago. Meanwhile, price increases in food articles based on CPI declined to 11 percent from 12 percent.

The report says in its efforts to better the inflation data, the government may have collected data from shops where goods are sold at controlled prices, like PDS.

"This trend of WPI higher than CPI in respect of food items is intriguing and is a trend against normal price behavior and needs to be examined more carefully, as it may have some important policy ramifications," the report quoted from an SBI research note.

Why would the government do this? Because of the RBI. The central bank has many a time indicated that it is now more relying on CPI-based inflation than WPI.

So, the government, desperate for a rate cut, may be hoping that a softer CPI food price will prompt the RBI to take a favourable decision sooner.

But the fact is that if this is indeed a government trick to force a rate cut, it is also risking the credibility of government data.

It is high time the government understood that a forced rate cut will only have negative impact on the economy.