But what if the rupee plunged after the dollars flowed in? There were no certainties here. The bottom line was that the scheme was a measured risk, with a probability that the RBI would lose money, a certainty that the bankers would make money, but also a reasonable chance that the country would be significantly better off.
For example, Lebow and Rudd (2002) estimate that measured inflation using the consumer price index overstates the actual change in the cost of living by about 0.9 percentage points per year, with a confidence interval ranging from 0.3 percentage point to l.4 percentage points per year. (The bias in the PCE deflator, which is chain-weighted, may be a bit less.)