RBI Governor, Dr Subba Rao has given an excellent speech on the state and limitations of Indian economics stats system. He cites 5 problems:
(i) Data Revisions: Measuring the economy remains a complex task and data uncertainty is a fact of life. Data revisions are a legitimate part of statistical compilation and dissemination. However, here in India, data revisions and systemic biases in data revisions are more frequent and common place. Most economies have to contend with an uncertain future; here, in India, we are having to contend with an uncertain past as well.
(ii) Inflation Measurement: currently, the WPI inflation is in negative territory – a sign that could be misinterpreted as the economy being in deflation even when there is no contraction in aggregate demand – while the inflation rates from the four CPIs are in the range of 9-10 per cent
(iii) Information on Leading Indicators for Business Cycles
(iv) Financial Soundness Indicators
(v) Data on Employment: Finally, I come to a major gripe. Globally, trends in employment are one of the most important inputs in setting monetary policy response. Unfortunately, we do not have any reliable nation-wide statistics on employment. Data on factory-sector employment are available from Annual Survey of Industry, but with a large lag that makes it virtually useless for monetary policy purposes. Farm sector employment data are also available at poor frequency and with long lags. Non-farm pay rolls capture employment trends in some economies. But, in India, data on organised sector employment, as obtained from employment exchanges, cover a very small part of the workforce. Against this backdrop, timely and accurate information on employment conditions will enhance our understanding of inflationary dynamics in the economy, and thereby improve the conduct of monetary policy.
I have always stressed on the need to reform the Indian stats system but finds no takers. It is pretty painful to analyse anything on Indian economy. You take data from one source and prepare a report. Then you get a call/email from someone saying data from such and such source (equally a good source) suggests this trend which is different from your report. And the entire analysis falls flat. And then there are other problems of not finding data, reports though media is ripe of stories on the same.
Good to see RBI Governor talking about the issues. Hope there is some action on the same.
PS. The conference papers are here and here is a brief summary of views and issues.