The constitution of a high-powered committee under the chairmanship of C Rangarajan, who heads the Prime Minister?s economic advisory council, to look into the estimation of savings and investments, is a welcome move. These indicators play a pivotal role in determining overall growth, and extensive changes have taken place in the Indian economy since the earlier investigations made by experts like professor K N Raj in the early 1980s and professor Raja J Chelliah in the mid-1990s. In fact, so sceptical are policymakers of the reliability of data on these core variables that the current committee?s mandate is to look at the entire set of procedures, right from the database to the methods of estimation, and also at the reliability and interpretational significance of the indicators at the aggregate level as well as their components. One reason for dissonance with the existing system is that both savings and capital formation in the Tenth Plan far exceeded projections, with the country?s savings rate shooting up by a tenth in the first four years for which data is available. Such large variations between estimates and actual numbers may be explained by many factors, an important one of which is infirmities in the calculation of household sector savings. Data is captured from an amorphous ?residual? group comprising regular households, small manufacturing units, kiosks and farm households. Experts have often pointed to the need for conducting independent household surveys to directly collect data on income and expenditures. And the quality of data suffers even in the case of corporate firms, as the estimates are based on information supplied by a sample of companies that need not always be representative enough.
Though the discrepancies between projections of investments or capital formation and their actual numbers have not been quite as large, doubts about the reliability of these figures have been thrown up by the extent of errors and omissions. In particular, differences between three sets of investment numbers that ought to tally?with raw data captured in three different ways?have gone up to unacceptably large levels. And then, there is the lag of almost a year between the time the data is collected from the field and crunched out for final publication. Hopefully, the new commission will work out more reliable indicators and ensure that the country has more up-do-date figures with which to analyse trends and formulate plans.
