From counting jobs to measuring inflation! India badly needs to solve its statistics problem

India has a huge official data and statistics problem and the problem is only growing bigger by the day.

By Prosenjit Datta  
Wednesday, July 18, 2018

The prime minister and his council of ministers insist that India does not have a jobs problem. It has a jobs data problem. That is, jobs are being created all right but we are not capturing them in our job surveys because the surveys are not properly designed. Some researchers - specifically Soumya Kanti Ghosh, chief economist of SBI and Pulak Ghosh of IIM, Bangalore - back the government claims. Ghosh and Ghosh used Employee Provident Fund Organisation enrolment data, to which they were given access by Niti Aayog, to conclude that many more jobs were created in the formal sector than originally estimated.

Other researchers - including Mahesh Vyas of Centre for Monitoring of Indian Economy (CMIE) - are sceptical of those claims. CMIE's own data showed that employment was not going up in the country and the jobs situation was not particularly rosy despite the economy growing at a steady clip.

Meanwhile, the controversy over India's GDP growth data itself refuses to die down. In 2015, the Central Statistical Organisation (CSO) changed both the base year as well as the methodology for calculating GDP. The first was a routine change that does not raise many eyebrows. It was the latter which created a much heated debate. The new series showed much faster GDP growth than had been captured by the earlier methodology. For 2013-14 for instance, the GDP growth figure as calculated by the new methodology shot up to 6.2 per cent. The older methodology had estimated it to be 4.8 per cent. Manufacturing growth under the new methodology moved up from minus 2 to plus 6 for the same period.

Savings and investment rates also changed significantly when calculated under the new methodology as did many other numbers such as consumption etc. Because the exact way the new methodology calculated growth was never explained in detail, most economists could not figure out why there would be such sharp divergence between the numbers calculated using the old methodology and the new methodology. Worse, the CSO compounded the problem by not updating the back numbers beyond 2011-12. Even the then Reserve Bank of India (RBI) governor admitted that he did not really understand the new GDP growth numbers. Meanwhile, respected economists and researchers pointed out that a number of statistics captured and put out by the CSO gave only a very partial picture of the economy.

For example, India was still focused on bringing out the Index of Industrial Production (IIP) data regularly (the IIP had also been updated though) even though services accounted for more than half of India's GDP. And though services were growing much faster than manufacturing and from a bigger base, there was no reliable index to capture service growth on a monthly, quarterly or even half yearly basis.

The consumer price index (CPI) and the wholesale price index (WPI) suffer from the same problem. Both only capture a slice of consumption and do not adequately capture the services component of consumption and inflation, even though services are the bigger part of the equation. And these are the most common official data sets and indices. There are problems in getting reliable data on everything from government investments, ownership of PSU, public enterprises profits and loss, manufacturing output and a host of other areas.

India has a huge official data and statistics problem and the problem is only growing bigger by the day. At one point, despite the fact that every economist agreed that our north eastern neighbour China was growing very rapidly, there was much doubt about Chinese official statistics. India now risks falling into the same category because many respected Indian and global economists cannot fully trust the numbers India throws up. If even the Prime Minister of the country admits that the government has no idea of how many jobs it is creating, that points to a serious problem.

It is not as if the government does not know this. Multiple studies have been commissioned and reports generated on how to improve data collection and analysis by the government. The problem is that the government does not seem particularly keen to sort out the problems or to take any concrete steps to improve the data collection and analysis. Several months after the Chief Statistician retired, the government still has to find and appoint a new one.

Some of the problems of accurate data collection and analysis can be sorted out if the government actually decides to do something. The Goods and Services Tax (GST) is throwing up enormous quantities of reasonably reliable data - at least better data than was being captured earlier on the business front. Meanwhile, new tools have also been created to deal with big data sets on a real time or near real time basis. Fixing India's data problem is problem easier today than it was even five years ago. The question is does the government want to fix the problem? Or is it content to carry on with doubtful data and unreliable statistics that no one really trusts.

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