Insights into Editorial: Redesigning India’s ailing data system
The new series of Gross Domestic Product (GDP) figures with 2011-12 as base, released in 2015, has not gone well with analysts; the withholding of employment-unemployment data for some time and consumer expenditure data, which is not released, added to this unease.
Bringing the National Sample Survey Office (NSSO) under the fold of National Statistics Office, altering its long-standing arrangement under the Governing Council and then National Statistical Commission, triggered suspicion.
The present national accounting and analytical framework misses out on many important dimensions of the economy and its complex character as an evolving economy that is constantly experiencing technological and institutional transitions and power plays in a market economy.
Overview of Indian System of National Accounts:
The NAS is a framework that provides an internally consistent description of National macro economy based on the processing of data generated by the entire National statistical system.
The estimates of National income and related aggregates and accounts are derived statistics that draw on basic data available from different primary sources.
The primary sources consist of data generated as a by-product of public administration system (such as land records, collection of direct and indirect taxes, civil registration of births and deaths, etc.) as well as data collected directly through censuses and sample surveys conducted by official agencies of the Central and State Governments.
The accuracy and quality of the National account estimates depend on:
(a) Geographical coverage and quality of primary data; and
(b) The methods, procedures and approximations used in translating the primary data into NAS framework.
Wide-ranging impact of GDP Estimate figures:
GDP covers all productive activity for producing goods and services, without duplication.
In effect it adds apples and oranges, tractors and sickles, trade, transport, storage and communication, real estate, banking and government services through the mechanism of value.
The System of National Accounting (SNA) is designed to measure production, consumption, and accumulation of income and wealth for assessing the performance of the economy.
GDP data influence markets, signalling investment sentiments, flow of funds and balance of payments.
The input-output relations impact productivity and allocation of resources; demand and supply influences prices, exchange rates, wage rates, employment and standard of living, affecting all walks of life.
Ministry of Corporate Affairs MCA21:
The shift from establishment to enterprise approach, replacing Annual Survey of Industries (ASI) with Ministry of Corporate Affairs MCA21 posed serious data and methodological issues.
The use of MCA21 data and blow up factors thereof without weeding out defunct enterprises, and then insufficient work on mapping of comparable ASI data, followed by similar survey on services sector enterprises were another major lacunae.
Corrections need to be made are:
- The data on GDP are initially estimated at current price and then deflated for constant price for comparability of data over time.
- It is necessary to separate out price effect to adjust value for real volume for comparison over time and sectors.
- There is a way of adjusting price effect through appropriate price index.
- The present series encountered serious problems for price adjustment, specifically for the services sector contributing about 60% of GDP, in the absence of appropriate price indices for most service sectors.
- The deflators used in the new series could not effectively separate out price effect from the current value to arrive at a real volume estimate at constant price.
- Price indices going into a low and negative zone in 2014-17 distorted real growth.
- The growing inequality and concentration of wealth in a few hands to the detriment of social welfare needs to be arrested at the earliest.
- We need data to assess competitiveness, inclusive growth, fourth-generation Industrial Revolution riding on the Internet of things, biotechnology, robotics-influencing employment and productivity, environmental protection, sustainable development and social welfare.
- Hence GDP data needs to be linked with a host of other data for deeper insight.
- We need to re-engineer the existing system, creating an integrated system populated with granular data.
- The country is vast, heterogeneous. There are non-linearities and path dependence, which should be considered while setting goals for development, reducing regional imbalance.
The present and future:
- We need a new framework for analysis for such a complex system and evolutionary process.
- There is a question of growing market power, automation, robotisation and other labour-replacing technologies affecting profitability, structural change and general welfare.
- We need to find alternative avenues for the unemployed and jobs lost.
- We also need to know in greater detail about market microstructure and optimality therein, the role of technology and advanced research, changing demand on human skills, and enterprise and organising ability, which are all complex.
- The consensus macroeconomic framework of analysis assumes symmetric income distribution, and does not get into the depth of structural issues, as it focuses on a trend-cycle decomposition of GDP for growth and stability in market parlance and a trickledown effect for percolation of income.
- In order to inject efficiency and stability, we need to have detailed data on how: markets clear, prices are formed, risks build up, institutions function and, in turn, influence the lifestyle of various sections of the people.
- The alternative to be realistic for the real world must rest on two pillars: the micro-behaviour of individuals, and the structure of their mutual interactions.
- In the changed situation of availability of micro data, we need to build a system to integrate the micro with the macro, maintaining distributional characteristics.
As official statistics is a public good, giving information about the state of the economy and success of governance, it needs to be independent to be impartial.
Data is the new oil in the modern networked economy in pursuit of socio-economic development.
The economics now is deeply rooted in data, measuring and impacting competitiveness, risks, opportunities and social welfare in an integrated manner, going much beyond macroeconomics.
We have a commitment to produce these statistics transparently, following internationally accepted standards, tailor-made to suit local conditions, for multi-disciplinary analytics.
As these statistics reflect on the performance of the government, it is necessary that its independence is maintained scrupulously.
To pursue the goal of a $5-trillion economy by 2024-25, harnessing demographic dividend, we must tap underused resources for demand creating investment, which require data to pursue policy right from a district and evaluate performance for efficiency including governance.