Data dynamics

The advisory committee has its task cut out

The Union government recently reconstituted the Advisory Committee on National Accounts Statistics to revise the base year for national accounts statistics and incorporate new data sources to enhance statistical accuracy. According to the gazette notification, the committee, chaired by former professor at the Institute of Economic Growth Bishwanath Goldar, has detailed the terms of reference (ToR). These include providing advice on the methodology of national accounts statistics, macro-indicators, and promoting research in this field. This process has been delayed for many years owing to various factors such as poor data quality, demonetisation, the implementation of goods and services tax, and pandemic-led disruption. Although the committee will have to advise on several critical issues, the initiation of the process to address shortcomings in the statistical system must be welcomed.

In terms of data, the Household Consumption Expenditure Survey (HCES) for 2022-23 was recently released after an 11-year hiatus, with another round for 2023-24 expected soon. However, the results aren’t exactly comparable with past surveys due to methodology differences. The HCES provides vital data on consumption patterns of the household sector. A decision regarding the revision of the base year is likely to be made after the completion of another round. This decision will be critical because it will have implications for various other indicators — the consumer price index (CPI), wholesale price index (WPI), and index of industrial production — which currently rely on data that is over a decade old. Given that the Indian economy is changing rapidly, without periodic updates, these indicators may not be reflecting the actual position, potentially affecting policy decisions.

Further, India needs a producer price index (PPI). It will not only gauge price movements at the production level but also help in constructing a more robust deflator for gross domestic product (GDP). The government is reported to have finalised the methodology for the PPI. The WPI, which is used predominately to deflate nominal GDP, has inherent limitations. Aside from price and output indicators, India also needs high-frequency employment data covering both rural and urban areas. This detailed and timely data is essential to accurately assess employment trends, identify areas of concern, and implement policies that address the specific needs of different regions and demographics. However, challenges for the committee extend beyond introducing new indices or merely revising existing ones. The Census, originally scheduled for 2021, has been postponed, and there is no definitive timeline for its future conduct. Without the latest Census data, the accuracy and reliability of survey results may be compromised. Besides, as outlined in the ToR, adopting and implementing United Nations standards present significant challenges. Accounting for well-being and sustainability is particularly difficult. The increasing digitisation and globalisation of the economy would necessitate developing new methodologies to accurately capture economic activities.

Additionally, the informal sector, which constitutes a substantial portion of the Indian economy, presents a complex challenge for accurate measurement and analysis. It is often argued that the present system does not accurately reflect the position of the informal sector and tends to overstate economic growth. Given the problems and doubts in the present system, the government has taken the first step towards rebuilding the statistical structure. The committee would do well to explore comprehensive strategies to overhaul and strengthen the Indian statistical system. Consistent and credible official data for various economic indicators is essential for informed decision-making in both the government and the private sector.