Opinion
Why has official Indian data on informal enterprises been kept under wraps?
Summary
- The results of a new survey rolled out to plug a big gap in GDP estimation haven’t been released yet. But that defeats its purpose of providing timely data on the country’s informal sector to policymakers, investors, researchers and ordinary citizens.
Barely a week goes by these days without an economist or policy wonk debating India’s growth numbers. Establishment economists are seen to lambast India’s economic statistics one day and defend them the next. Even statisticians have joined the debate, with some of them expressing doubts over the official growth figures. There are three key points of contention: the use of an untested corporate database, the manner in which nominal growth rates are being deflated to arrive at real (inflation-adjusted) growth rates, and the assumptions used to estimate informal sector growth.
Problems arising from the new corporate database have been acknowledged by Bibek Debroy, chairman of the Economic Advisory Council to the Prime Minister. “In comparison with the deficiencies of the ASI (Annual Survey of Industries), the MCA-21 (the new corporate database) gave rise to significant measurement challenges," wrote Debroy in an article co-authored with the economists Amey Sapre and Aditya Sinha (‘Measuring India’s manufacturing sector remains a data challenge,’ Mint, 15 May 2023).
Speaking to The Economist recently, India’s former chief statistician Pronab Sen argued that the old GDP series (2004-05 base year) may have captured real growth rates more accurately. In an earlier interview to The Wire, Sen had argued that India’s recent growth numbers were likely to be overestimates because of how informal sector growth was being measured. Sen argued that the post-pandemic recovery had been slower for informal firms. But since the GDP numbers relied on formal-sector proxies to estimate informal-sector activity, these were likely to be over-estimates.
Another former chief statistician has expressed disagreement with Sen’s view. Writing in Mint, TCA Anant argued that the official growth figures may in fact be underestimating informal sector growth (‘India’s informal sector could be adding more value than we know,’ 13 December 2023). Anant marshalled wage data from the Periodic Labour Force Survey (PLFS) to suggest that the informal sector has been buoyant.
Two former officials of the ministry of statistics and programme implementation (Mospi), Sanjay Kumar and N.K. Sharma challenged Anant’s conclusions, since they were based on nominal wages (without adjustments for inflation). Once nominal wages are adjusted for inflation, wage data indicates “stagnation" rather than buoyancy, they wrote (‘The performance of the informal sector demands in-depth analysis’, Mint, 24 December 2023).
Till recently, India lacked an annual survey of informal firms. Other than agriculture—for which annual data is available—estimates of informal sector output have typically relied on crude proxies or past trends. National accountants would derive the base-year estimates of value-addition in this sector based on the results of the most recent quinquennial survey of unincorporated enterprises. But growth estimates for subsequent years would be extrapolated from historical trends or proxy indicators.
Hence, the informal-sector growth numbers simply reflected the assumptions made by national accountants during the base-revision exercise.
Recognizing this data gap, Mospi rolled out a new annual survey of informal enterprises in 2019. The first round of the Annual Survey on Unincorporated Sector Enterprises (ASUSE) was experimental, and ran from October 2019 to March 2020. Since then, two full-fledged ASUSE annual rounds (2021-22 and 2022-23) have been completed and a third round is underway (2023-24), a Mospi official said in response to a right-to-information (RTI) query by this writer.
However, no ASUSE data has been released so far. While Mospi released a fact-sheet of the new consumer expenditure survey (HCES 2022-23) earlier this year, ASUSE numbers remain under wraps. My queries on whether (and when) ASUSE fact-sheets might be released elicited no response.
The ministry’s refusal to release the ASUSE data is deeply problematic. It defeats the very purpose of such an annual survey: providing timely data on the country’s informal sector to policymakers, investors, researchers, startups and ordinary citizens.
It seems plausible that the pandemic hit small informal enterprises harder than large formal firms. But whether informal firms recovered faster or slower in the post-pandemic period can be known with certainty only once ASUSE results are revealed.
It is possible that the ASUSE data will be used for the next GDP base-year revision exercise. Releasing the data ahead of that exercise would give data users a chance to scrutinize this new data-set and provide national accountants important feedback ahead of the base revision. If it is withheld till then, data users could be in for a rude shock when the next base revision occurs.
Perhaps someday in the distant future, Mospi’s mandarins will deem it fit to release a quarterly series on the informal sector based on the ASUSE or similar surveys. And maybe that series will be incorporated in the estimation of quarterly GDP numbers. If so, we might get some sense of the dynamism and volatility of India’s dual-track economy. Till then, the informal sector will grow each quarter simply by assumption.
