Data blues: Govt must urgently improve CSO's functioning

A recent Reserve Bank of India (RBI) monograph, titled Examining Gross Domestic Product Data Revisions in India, shows how advance estimates of gross domestic product (GDP) are consistently biased downwards and are frequently updated upwards in subsequent periods. Updating GDP figures is an accepted international practice; as more and better data becomes available, it is but natural to incorporate it in the final figure. However, when the initial estimates are consistently biased in one direction, it only shows that not all is right in the country’s statistical regime. Unfortunately, this is just one of the many issues plaguing Indian economic data. Arguably the chief among them is the lack of comparability of the new and the old GDP series. The old method, which mainly relied on production data from various sources, was very different from the new one, which relies on value-added data reported to the Ministry of Corporate Affairs by companies. On paper, the latter is a better system because it relies on value-added data rather than production data, which then needs to go through many steps before it can be converted into a GDP figure. However, when the Central Statistics Office (CSO) itself admits that the two estimates are not comparable and that it is unable to create a back series for others to compare, the conclusion is that something is seriously amiss in India’s statistical office.

The biggest casualty in this is the credibility of economic data, which, for all its flaws, was, till recently, acknowledged globally to be fairly accurate and credible. But today, leave aside the global community, even within the government there is a believability gap. Compounding the problem is the lack of historical comparability, which prevents analysis and fine-tuning of economic policy and resource allocation. The GDP back series, therefore, is critical and must be constructed. Moreover, improvements in GDP and other economic estimates are not a one-time affair, they need to be organic and ongoing, absorbing better technologies, methods and data. From all available evidence, it is apparent that the CSO is unable to meet the demands of the new economy. The solution is not just to correct the flaws in GDP estimation but also to improve the functioning of the CSO itself. 

The rapid digitisation of the Indian organised sector economy, combined with the sustained significance of the informal sector, necessitates the coexistence of the old and the new and is throwing up both challenges as opportunities. Estimating and aggregating across various sources require organisations such as the Indian Statistical Institute to develop and test new methods — a function it was created for, but is found wanting. At the same time, estimation is now not just within the realm of statistics or economics. Large amounts of real-time data are now accessible through Application Programming Interfaces (APIs) such as those from tax records, digital payments or e-commerce. It requires data science and information technology professionals to work with statisticians and economists. According to a parliamentary finance panel, India’s economic revival is hindered by a lack of reliable and quality data. It also noted the consumer price index did not adequately capture the changing cost of services such as education, health care and transport. The CSO must change itself and be in tune with the new realities.