In a market-oriented economy such as ours, a well-conceived, timely and reliable official statistical system is crucial to present a realistic picture of the economy. A dependable statistical system provides a correct diagnosis of underlying conditions, and serves as a key policy formulation input.
Besides, the dispersal of authentic data would also help those in industry, services, economists, students, NGOs, etc, to dovetail their strategies to the emerging realities. It is in this context that the availability of reliable and accurate statistics becomes more a necessity than an option.
In our country, a highly credible statistical system was put in place right after independence. Thus, India ranks among the very few developing countries, which regularly make available both macro and micro data to the public with assured transparency. However, despite this, the quality of official statistics?constituting the building blocks of the statistical system?has deteriorated over the years.
The decline took place substantially in the post-liberalisation period, especially as the dismantling of the licensing regime made statistics collection voluntary. Today, the methodology, conceptualisation, timeliness, sample design and computation of data are out of sync with reality. This is as true of agriculture, manufacturing, the corporate and non-banking financial sectors as of computation of inflation, capital formation, etc. Policy decisions taken on the basis of faulty statistics have the potential of being inherently flawed.
Let us take the example of data on agriculture production. Here, the weakening of the land revenue system has made it difficult to estimate land use, which is central to any estimate of farm production. Not surprisingly, data has become unreliable, creating an important gap in our statistical system.
Index of industrial production (IIP) data is also unrealistic. The base year for IIP continues to be 1993-94, despite the sweeping structural changes that have taken place in the Indian economy in the subsequent period. No wonder items like typewriters and sewing machines continue to remain in the index despite their diminished importance while items of relevance such as mobiles, laptops and CDs are not represented. It is essential that the items selected for IIP are in conformity with their importance in the economy.
Similar is the situation with data pertaining to the wholesale price index (WPI), used to measure inflation. In this case, too, the base year continues to be 1993-94, price quotations may not be adequate and the items have weights that do not necessarily reflect market realities. It is also reported that the index for as many as 167 items have not been revised for periods ranging between eight and 60 months.
Besides, services are not included in the calculation of either IIP or WPI. This is despite the fact that the sector constitutes around 54% of GDP. Similarly, items such as transportation, electricity, rent and medical expenditure, which form an important part of the consumption basket, go unrepresented. Moreover, the indices capture data from only large firms while the coverage of small-scale, unorganised/unregistered and exporting sectors are inadequate and poor.
Another serious problem is the large gaps between advance and final estimates computed by the government. For example, there has been an upward revision of real GDP figures by 1% and more in the last few years. According to advance estimates, real GDP grew at 8.1% in 2005-06, which was upscaled to 9.4% in the final estimate. Furthermore, the downward revision of real GDP growth from the advance estimates of 6% for 2000-01 to the final estimate of 4%?a full 2% below?casts doubts on its credibility. Similar is the case with recent upward revisions in WPI figures.
There are also methodological problems such as incremental infusion of capital not being counted as FDI, construction considered services by CSO and industry according to RBI, inadequacy of data at the state level, among others. To overcome these deficiencies, it is important that new methods are devised to ensure accurate and latest data collection and to quicken the delivery system?both at the centre and state level?by effective coordination between government agencies, strengthening the capabilities of existing staff and providing the necessary infrastructure.
There is need for independent third-party audit, which questions the validity of data produced by the government. Finally, public-private partnership in data collection and dissemination, which supplements and not supplants the government data collection machinery, is a necessity.
?The author is senior economist, PHD Chamber of Commerce & Industry