India's spotty economic data puts at risk a fast-growing market - Latest News

India’s spotty economic data puts at risk a fast-growing market –

For years, the South Asian country relied on ancient surveys to determine everything from gross domestic product to inflation. Most of India’s economic data is based on figures collected more than a decade ago, when smartphones were scarce and apps like Uber or Zomato hadn’t revolutionized the way Indians travel, eat and shop.

This means that the consumer price index – which the central bank uses to determine borrowing costs – does not fully reflect the fabric of modern India. The Department of Statistics still collects sales data for semi-obsolete items such as audio cassettes, making it difficult for market watchers to gauge the true strength of the world’s fifth-largest economy and form an accurate picture of its demographics and consumption habits.

“We have programs for people living below the poverty line, but we don’t know how many are poor,” said Pronap Sen, former chief statistician of India.

It is a troubling problem for Prime Minister Narendra Modi, who is touting India as the next big market for global investment and trade. Economists warn that the risks of policy mistakes will rise unless India moves quickly to update the numbers and remove barriers to accessing reliable data.

Modi’s economic adviser Bebek Debroi and his colleague Aditya Sinha wrote in a column for Hindu this week. Our tools for understanding and managing our economic realities are grossly inadequate.

Take the case of India Services sector. part now responsible for nearly half of household spending, though it carries a weight of 24% in India’s Consumer Price Index, which has not been updated since 2012. In another example, Indians spend less than 30% on food, although this metric It includes about half of the CPI basket.

“What we can’t measure we can’t manage,” chief statistician JB Samanta said at last month’s event, vowing to “create an ecosystem where data guides policymakers on a path to sustainable development.”

After years of delays, the government started a file new Consumer Expenditure Survey 2022, which captures consumption patterns in India and will help shape policy. But the survey won’t feed into measures of GDP or the consumer price index for at least two years, forcing analysts to use it substitute Indicators like air traffic and fuel demand to check the pulse of the Indian economy.

To estimate GDP more accurately, the government has also compiled a list of 200 important data sources, according to people familiar with the matter. The list includes collection of taxes on goods and services, corporate filings, and electronic road billing for interstate movement of goods. The people said India’s Ministry of Statistics is pressuring other government departments to share information in a timely manner to reduce delays in reporting the data, and asked not to be identified because the discussions are private.

The Statistics Ministry did not respond to requests for comment.

Unreliable data

The issue is not limited to outdated numbers. Frequent revisions of existing data have only added to the frustration, which has led to this difficult to predict where one of the world’s fastest-growing economies is headed – and to spark accusations among the Indian political opposition that the numbers have been manipulated.

Data revisions in recent years have made India’s growth look impressive during a devastating monetary embargo. During a later review, the economic downturn lessened the pandemic, making the country’s recovery look more brisk.

Kunal Kundu, Societe Generale GSC Pvt. An economist said forecasting India’s growth is a “risky undertaking”, in part because the numbers are so resilient. The final quarter’s GDP surprised many when it came in by one percentage point above estimates.

“The reason everyone gets this wrong is the alarming regularity in reviewing the data,” he said.

Officials now avoid relying so heavily on government numbers. For example, rather than using “bad data,” RBI economists are more likely to use a combination of intuition and inflation numbers to set interest rates, according to Sen.

“Monetary policy makers supplement the official estimates with information on ancillary variables for a more consistent assessment and to reduce policy errors arising from data revision,” Reserve Bank of India Governor Shaktikanta Das said in June.

There is no roadmap

The problem of data collection in India has many roots. A staff shortage at the Statistics Ministry slowed progress on the consumer spending survey, as well as a new nationwide census, which has not been updated since 2011.

The number of field detectives has also broadly stagnated since the 1970s, even though India’s population has grown by hundreds of millions of people. Today, loosely trained contractors are responsible for collecting the bulk of demographic information across India.

With national elections less than a year away, few analysts believe the Modi administration will release sensitive statements ahead of the vote, particularly on issues such as employment. The infusion of politics into data collection has frustrated many of India’s chief statisticians, who maintain that the nation cannot meet its growth targets if no one knows what is happening on the ground.

“There is a credibility crisis,” said PC Mohanan, former head of India’s National Statistical Commission. to resign In 2019 to protest the government’s decision to withhold the jobs report.

“In the absence of real and credible data, people will resort to all kinds of interpretation and this is a problem,” he said. “Who knows the right picture, because there is no scanning.” DM


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