India should strengthen its database

Given the lack of detailed data on the unorganised sector, much of the discussion on the economy is centred on India Inc, resulting in a distortion in policy formulation and deficiencies in resource allocation. The setting up of the National Statistical Commission is thus good news, hoping that it will oversee the building up of a reliable and timely statistical database to aid planning.

It is indeed a good augury that the Government has appointed the Chairman of the Central Statistical Commission, the constitution of which is long overdue. The Commission should streamline the statistical system, including data collection, analysis and dissemination.

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 meagre and unreliable figures. That India, which has produced such doyens of statistics as D. D. Kosambi, P. C. Mahalanobis, R. C. Bose, and C. R. Rao, should have such statistical deficiencies is a matter of concern.

 

The weakness of the database is revealed by the lack of data on the ” unorganised” sector, which constitutes a significant portion of the national income, even in the non-agricultural sector, as seen from Table 1.

Nearly 60 per cent of the Net Domestic Product comes from the so-called unorganised sector, while `services’ contribute almost 50 per cent. 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.

Little data on unorganised sector

The savings rate of the economy was around 30 per cent in 2005-2006, and nearly 90 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 categorised as households and, hence, there must be a segregation between pure wage-earning, consuming households and enterprise households.

Given the lack of detailed data on the ” unorganised” sector, much of the discussion on the economy is centred 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 as provided by the government but seems totally off the mark.

POTA data

According to the Economic Survey, across India, only 3.6 lakh persons are employed in the wholesale and retail trade, and 44,000 work in the construction industry. Even in Bangalore, these numbers could run into lakhs.

The database would be amusing but for its tragic consequences. It can be inferred that the role of the “unorganised” 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, labour, 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 sampling techniques and improved training.

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 minimised.

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. There is quite a task cut out for the National Statistical Commission and the challenges are enormous. One hopes it is able to oversee the building of 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 decentralised 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.

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