Farm Truths
We require reliable economic data for policy responses
India must update its neglected data systems so that nobody in need of state support is left out
Estimates of gross domestic product (GDP) for the first quarter (April-June) of fiscal year 2023-24 were released on 31 August. As per the estimates, GDP in this first quarter increased by 7.8% on a year-on-year basis at constant prices. This were broadly in line with expectations, but continue to raise concerns on the long-term sustainability of India’s economic growth. Compared to growth in the same quarter last year, growth slowed down in all the sectors except for agriculture and finance, real estate and professional services.
While there can be mixed opinions on the projected trajectory of economic growth in the years ahead, the real issue is the reliability of official estimates. Questions have been raised on the reliability of national accounts data even earlier. Among the prominent critics is the chief economic advisor during the first term of the incumbent National Democratic Alliance (NDA) government, Arvind Subramanian, who raised questions on their reliability and robustness.
While criticisms of the methodology and concepts are common, a major problem with the current series of national accounts is their use of outdated base-year data. The current series is based on 2011-12 as their base year, which is more than a decade old. There is unlikely to be a revision in the next five years, given the absence of key survey data such as the findings of consumer expenditure surveys, which are unlikely to be available before 2025.
However, while more recent data is available for several indicators, such as the periodic labour force surveys (PLFS) which are now available for the last five years, it is yet to be incorporated in the current series. Similar is the case with the unorganized sector, for which we have data available that has not been incorporated.
As a result, data inputs on the country’s household sector, as well as informal segments of the manufacturing and services sectors, are extrapolations of organized- sector data to a significant extent. The other notable absence is the availability of Census data, which is also unlikely to be available before 2026. This is a particularly serious problem for a country like India, whose economy has seen several shocks and also changes over the past decade or so.
GDP estimates are the most commonly used indicator of the health of an economy and the absence of data based on more recent series raises several questions on the reliability of the latest estimates. But these are not alone.
Our indicator of inflation at the retail level is based on the Consumer Price Index, which also has 2011-12 as its base year. With rapid changes in consumption patterns, this is also outdated. Since the 2022-23 round of the consumption expenditure survey is now complete, the least that can be done would be to update both those essential data systems in accordance with more recent information.
While GDP and inflation two are important indicators used by policymakers to design and implement major policy initiatives, the situation is no better for other data-sets that are directly relevant to citizens for them to access basic services.
Among these, the most prominent database is the Socio-Economic Caste Census (SECC), which is used for identifying beneficiaries for almost all programmes in rural areas and some in urban India. The last SECC, however, was conducted back in 2012. A whole decade later, the socio-economic situation of households would have certainly changed. The same can be said of using specific data indicators to identify households as ‘priority’ and ‘beneficiary’ households. Today, as these are unlikely to be a true reflection of the ground reality, they would lead to more errors of inclusion and exclusion.
Erroneous or outdated estimates do not just erode the credibility of official statistics, but can also misguide our policy responses to emerging issues. A good example is the country’s data on agriculture. Latest estimates from the GDP data-set show an acceleration in agricultural growth. This is to be expected, given that these are extrapolated from the advance estimates released by the ministry of agriculture. But here is the problem. Despite the government’s claim of record agricultural production, its policy response record so far has been ad hoc and arbitrary, featuring export bans, stock limits and so on. Clearly, all this is not in sync with its own official estimates. A likely explanation for the divergence on display is the actual unreliability of official estimates. Market information from traders and farmers has distinctly been at odds with what official agricultural statistics suggest.
The issue of dodgy data is not just restricted to agriculture, but is also evident in case of manufacturing and services. Outdated price indices also have implications for the appropriate deflator used in arriving at various estimates at constant prices, other than serving as an imperfect gauge for the monetary policy committee of the Reserve Bank of India (RBI).
While there is clearly a need to update and revise the country’s important macro indicators, our priority should be to update and revise data-bases that affect the entitlements of citizens. At a time when inflation has been persistently high and people’s incomes under stress, the use of outdated census estimates and a 2012 SECC only end up excluding several households that truly need the support of National Food Security Act provisions.
Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi
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First Published:11 Sep 2023, 09:36 PM IST
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