<p>Reserve Bank of India Governor D Subbarao’s complaint about the unreliability and undependability of much of the country’s economic data is an official acknowledgement of a serious problem. The fact that it comes form the RBI governor is important because the formulation of policies and nature of actions of the bank are vitally dependent on the quality of data that it gets from the economy. There have always been doubts in unofficial circles about the correctness of the figures relating to prices, employment, wages, industrial and agricultural production and various other indicators. </p>.<p>The collection of data, their analysis and development of indices on their bases have been consistently poor and inefficient in the country. It may be noted that once there was similar skepticism about the data relating to the Chinese economy. This was because it was thought there was government control over data. But the Chinese economic data are now considered to be more reliable than those from India. That is a poor commentary on the openness of the Indian economy and the efficiency of its data collection and processing systems.<br /><br />The examples are many. In February last year the GDP growth was estimated at 6.8 per cent. This was later revised to 7.7 per cent and 9.1 per cent. Such wide variations cannot be defended by any argument. The index of industrial production (IIP) data have often been misleading. It is not just short-term data that has been found inadequate and misleading. There have been inconsistencies and inadequacies in the case of long-term figures also. That shows that the problem is with the data collection and analysis systems. </p>.<p>Economic indices like the wholesale price index and the IIP need revamping as they are not faithful indicators of what they try to represent. The true measure of inflation often evades understanding because of wrong computation. In a big country of uneven economic performance with large parts of the economy in the unorganised sector, data collection and processing present difficulties but efforts are not seriously made to get over the problems.<br /><br />The availability of timely and correct data is the most important requirement for economic policy formulation. The RBI has sometimes been led to take decisions, which were not really warranted, on the basis of faulty data. Subbarao has indirectly admitted this. <br /><br />There have been proposals to improve the system but enough attention has not been paid to them.</p>
<p>Reserve Bank of India Governor D Subbarao’s complaint about the unreliability and undependability of much of the country’s economic data is an official acknowledgement of a serious problem. The fact that it comes form the RBI governor is important because the formulation of policies and nature of actions of the bank are vitally dependent on the quality of data that it gets from the economy. There have always been doubts in unofficial circles about the correctness of the figures relating to prices, employment, wages, industrial and agricultural production and various other indicators. </p>.<p>The collection of data, their analysis and development of indices on their bases have been consistently poor and inefficient in the country. It may be noted that once there was similar skepticism about the data relating to the Chinese economy. This was because it was thought there was government control over data. But the Chinese economic data are now considered to be more reliable than those from India. That is a poor commentary on the openness of the Indian economy and the efficiency of its data collection and processing systems.<br /><br />The examples are many. In February last year the GDP growth was estimated at 6.8 per cent. This was later revised to 7.7 per cent and 9.1 per cent. Such wide variations cannot be defended by any argument. The index of industrial production (IIP) data have often been misleading. It is not just short-term data that has been found inadequate and misleading. There have been inconsistencies and inadequacies in the case of long-term figures also. That shows that the problem is with the data collection and analysis systems. </p>.<p>Economic indices like the wholesale price index and the IIP need revamping as they are not faithful indicators of what they try to represent. The true measure of inflation often evades understanding because of wrong computation. In a big country of uneven economic performance with large parts of the economy in the unorganised sector, data collection and processing present difficulties but efforts are not seriously made to get over the problems.<br /><br />The availability of timely and correct data is the most important requirement for economic policy formulation. The RBI has sometimes been led to take decisions, which were not really warranted, on the basis of faulty data. Subbarao has indirectly admitted this. <br /><br />There have been proposals to improve the system but enough attention has not been paid to them.</p>
