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Diverse Signals Show Weakened Statistical System Requires Cure

 

SEPTEMBER 19, 2019

By TIOL Edit Team

RELIABILITY of economic forecast, budget estimates and data collected has come into sharp focus due to certain developments. Analysis of recent data-related developments underscore the need for authorities to do much more than what they have done so far to plug data gaps at national, state and district levels.

Credible and timely data helps policy makers, businessmen and other stakeholders of economy to take correct decisions. A lot of wrong decisions and investments can be avoided by timely collection and dissemination of data.

Before elaborating on this, consider first the four developments.

First, Reserve Bank of India (RBI) has forthrightly admitted that it needs to improve its projections for gross domestic product. The admission has come in the wake of estimated growth of GDP in first quarter of 2019-20 turning out to be 5% as compared to 5.8% projected by RBI.

Second development is the study on States' Budget conducted by National Institute of Public Finance and Policy (NIPFP). Released earlier this month, the study / working paper (WP) is captioned 'Budget Credibility of Subnational Governments: Analysing the Fiscal Forecasting Errors of 28 States in India'.

As put by WP, "There is a heterogeneity in the magnitude of errors across subnational governments in India. The forecast errors in revenue receipts have been greater than revenue expenditure. Within revenue receipts, the errors are pronounced more significantly in grants component. Within expenditure budgets, the errors in capital spending are found greater than revenue spending in all the States".

Third, the Ministry of Statistics and Programme Implementation (MoSPI) is commissioning a new study on the impact of Statistical Development Scheme. It is a central scheme that was launched in 2007-08 to help States improve their statistical systems. The scheme was last evaluated by National Institute of Financial Management (NIFM) in 2017.

NIFM study recommended: "By examining and evaluating the performance of the scheme on the basis of output and outcome in the last five years, it is recommended that the Scheme 'Capacity Development' with all its components should be continued in future also as still a lot of ground is to be covered in developing statistical capacity in the country especially at the state, district and local level."

Fourth, the World Bank is working on a project proposal named 'National Programme for Improving the Quality of Statistics in India' following a request from the Central Government. The million aid for the project is likely to be finalized by March 2020.

According to Project Information Document (PID), "Nationwide large-sample surveys that are conducted once every five years are important, but insufficient to meet such demands. Sample sizes are not adequate for generating reliable data for administrative units below the state level; and surveys, and survey methods, struggle to keep up with dynamism in the economy. Respondents - especially businesses or high-income households - are less willing to spend time completing survey questionnaires".

It notes: "there are opportunities to both improve survey operations to make them more efficient and less costly, and for statistical outputs to rely on blended (survey and non-survey) modes of data production that take advantage of administrative (digital) data sources".

Had there been timely availability of credible data on all aspects of economic activity, the diagnosis of current economic slowdown would have been better. And better would have been the policy interventions. The businesses and markets would have also responded in keeping with reality as mirrored by depth and quality of data.

It is indeed sad that Indian statistical system has not kept pace with the country's growing and diversifying needs for data. What is more unfortunate is the Government's slow speed. It, for instance, has not yet finalized National Policy on Official Statistics. Its draft was released in May 2018 for public comments.

It has not yet issued an action taken note on recommendations of Report of the Task Force on Improving Employment Data that gave its report in mid-2017.

As put by the Report, "While India began by giving great importance to data collection and evidence-based policy making in the 1950s, over time, the support for this activity has dwindled. The Task Force is of the view that this is a very unhealthy development and that it requires a major correction. The government needs to recognize the importance of high-quality surveys and data for policy making and policy discussions. All well-functioning economies today rely on a variety of statistical analyses for policy making. It is time that the government brings about serious institutional changes and provides necessary financial resources to revamp out statistical systems".

The other day the Nation celebrated birth anniversary of Bharat Ratna Sir M. Visvesvaraya as Engineers' Day. Instead of celebrating his contributing to engineering and economic planning as a ritual, we should act on his wisdom.

In his 1920 book 'Reconstructing India', Sir Visvesvaraya wrote: "Complete statistics should be specially collected, giving full particulars of the material resources of the country and the employment of the people, and every facility and encouragement should be given to the public to study and discuss problems concerning their industries, occupations and material wealth, and to form a correct idea of the economic status of the country".

In his address to Mysore Engineers delivered in November 1910, he stated: "One of the first duties of the engineer is to maintain an epitome or statistics, data and information pertaining to the district in general and to public works in particular. It is only by possessing correct information and comparing the works and resources of one district with those of another and the cost of maintenance of one year with that of previous years, that the engineer will get a true perspective view of his charge".

The first step towards building New India should thus begin through revamp of statistical system. The Government should not be miserly in investing money in the system. It should also shed its inhibition to share unpleasant data with the public.


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