Without a strong database, strong policies are useless -- R. Vaidyanathan

Without a strong database, strong policies are useless

http://prof-vaidyanathan.com/2013/05/03/without-a-strong-database-strong-policies-are-useless/ …

Niti Central 03/-5/2013                                                                          Prof R. Vaidyanathan

There are many aspects of economy and society where reliable and timely data are not available and it is unfortunate that major policy formulations are made by the Central and State Governments based on meager and unreliable figures. That India, which has produced such doyens of statistics as DD Kosambi, PC Mahalanobis, RC Bose, and CR Rao, should have such statistical deficiencies is a matter of concern.

Table-1

Share of NDP 2010-11

Source: St .76.1, National Accounts Statistics [NAS]—2012, Central Statistical Organization [CSO], G.O.I New Delhi.

Since unorganized sector constitute a significant portion of our economy the inadequate data base pertaining to them is all the more problematic.

Nearly 57 per cent of the Net Domestic Product comes from the so-called unorganized sector, see table 1 while ‘services’ contribute almost 65 per cent to NDP. Also there has been substantial growth in such service sectors as trade, transport, hotels and other professional services. Much of this is due to partnership and proprietorship firms, about which there is no reliable disaggregated data available.

Savings Rate: The savings rate of the economy is around 30 to 34 per cent in the last few years and nearly 80 per cent of this came from household savings.

The households in the data include consuming and producing units. The partnership and proprietorship firms in trade, etc., are categorized as households and, hence, there must be segregation between pure wage-earning, consuming households and enterprise households.

There is no reliable data available on the savings of ‘pure consuming’ or ‘wage earning’ households. Earlier some estimates could be made using All India Income Tax Statistics data about different category of tax payers region wise. That publication has been discontinued for reasons known to only Ministry of Finance.

Given the lack of detailed data on the ‘unorganized’ sector, much of the discussion on the economy is centered on India Inc., a euphemism for the hundred or so active Sensex stocks. This results in a distortion in policy formulation and deficiencies in resource allocation.

There is also no reliable data on employment in service activities. Table 2 shows the employment in some of the service activities in the organized sector as provided by the Government but seems totally off the mark.

Table-2

Employment in Private Organized Sectors [lakhs]

Note: Coverage in construction on private account is inadequate
Source: Ministry of Labor- quoted in the, Economic Survey 2012-13, Table 3.1 Employment in organized sectors-public and private; pp. A56, GoI New Delhi

POTA data

According to the Economic Survey 2011 across India, only 5.5 lakh persons are employed in the wholesale and retail trade, and 1 lakh work in the construction industry. Even in a single city like Mumbai these numbers could run into many more lakhs.

The database would be amusing but for its tragic consequences. It can be inferred that the role of the “unorganized” would be substantial, even in the manufacturing sector, in the context of the massive outsourcing of production and other activities. These are only some instances of the inadequacy of the database.

Without simple and reliable numbers pertaining to national income, savings, labor, and so on, it would be a Herculean task to plan for a large country like India. Many of the assumptions pertaining to the 1950s and the 1960s may not be appropriate now in the early 21st century.

POTA data (that is, Pulled Out of Thin Air) may be more harmful since resource allocation could get distorted. With such a weak database, the policy-makers try to formulate the Five-Year Plans, annual Budgets and socio-economic legislation. The situation at the State level needs substantial improvement as they constitute the building blocks for the national statistical system. The Department of Planning and Statistics is dysfunctional in many States and the person appointed as Minister in such a department feels he has been given an ‘unimportant’ portfolio. Data collection by many of these departments requires significant improvement with the introduction of modern technology and techniques and improved training.

Timeliness

Not only is the data unreliable, it is also not timely. For instance we are in the middle of 2013 and we have data for 2011 -12 and that also for the organised sector. Data for 2012/2013 is yet to see the light of the day in the CSO web site. We also have habit of publishing tentative /provisional/quick estimates with considerable time lag. In the current Economic Survey document a new terminology has been introduced namely “provisional actual”.

Involve private sector

It is also important to explore ways to involve the private sector in the analysis and dissemination of statistical information. By outsourcing the publication of collected data, we may achieve timely publication and more readable books and reports.

Of course, the responsibility for collecting data rests with the government as it may not want to involve private agencies in that sphere, for fear of distortions. The lag between data collection and dissemination which, in many areas, is nearly two years, needs to be minimized.

For, with such lag, the numbers are neither useful to policy formulators nor to researchers for forecasting purposes.

In the current context, many a time, “quick/provisional estimates,” “tentative figures” or “preliminary numbers” are used for long periods of more than one year. It is rather unfortunate that the country should be aspiring to become a major power with such a weak database. It is told in studies pertaining to database that when the past is imperfect, the present is tense and the future uncertain. The National Statistical Commission has made many suggestions and the challenges are enormous. One hopes we are able to build a vibrant, robust, reliable and timely statistical base for the economy. That would be the best tribute to the doyens of statistics who built fine institutions for research and training in the field.

As pointed out by the National Statistical Commission chaired by Dr C Rangarajan, the mission statement of the statistical system should be “to provide, within the decentralized structure of the system, reliable, timely and credible social and economic statistics to assist decision-making within and outside the Government, stimulate research and promote informed debate relating to conditions affecting people’s lives” (Report of the National Statistical Commission; Volume 1, p82).

India deserves a better database and this is something India can and should achieve as it is a sine qua non for orderly growth and meaningful policy formulations.

_____________

Author is Professor at IIMB- Views are personal-