Spotty economic data in India jeopardises a fast-growing market–
Behind India’s record-setting growth lies a glaring caveat: The world’s most populous country has a serious data problem.
For years, the South Asian nation has relied on outdated surveys to quantify everything from gross domestic product to inflation. Most of India’s economic data is based on numbers collected more than a decade ago, when smartphones were rare and apps like Uber or Zomato hadn’t yet revolutionised the way Indians travel, eat and shop.
This means the consumer price index — which is used by the central bank to set borrowing costs — doesn’t fully capture the texture of modern India. The statistics ministry still collects sales data for near-obsolete items like audio cassettes, making it difficult for market watchers to measure the true strength of the world’s fifth-largest economy and form a nuanced picture about its demographics and consumption habits.
“We have programmes for people below the poverty line, but we don’t know the number of poor people,” said Pronab Sen, India’s former chief statistician.
It’s an alarming problem for Prime Minister Narendra Modi, who’s pitching India as the next big market for global investment and trade. Economists warn that the risk of policy errors will rise unless India moves quickly to update figures and remove barriers to accessing reliable data.
“Our ability to track inflation effectively has been severely undermined,” Modi’s economic advisor Bibek Debroy and his colleague Aditya Sinha wrote in a column for The Hindu this week. “Our tools for understanding and managing our economic reality are grossly inadequate.”
Take the case of India’s services sector. The segment is now responsible for roughly half of a household’s spending, though it holds a 24% weight in India’s CPI, which hasn’t been updated since 2012. In another example, Indians spend less than 30% on food, though that metric comprises about half of the CPI basket.
“What we cannot measure we cannot manage,” chief statistician G.P. Samanta said at an event last month, where he vowed to “create an ecosystem where data guides policymakers on the path of sustainable development”.
After years of delays, the government started a new consumer expenditure survey in 2022, which captures consumption patterns in India and will help in policy formation. But the survey won’t feed into GDP or CPI metrics for at least two years, forcing analysts to use alternative indicators like air traffic and fuel demand to check the pulse of India’s economy.
To more accurately estimate GDP, the government has also made a list of 200 critical data sources, according to people familiar with the matter. The list includes goods and services tax collections, company filings and e-way bills for interstate movement of goods. India’s statistics ministry is pressing other government departments to share information in a timely manner to reduce lags in data reporting, the people said, asking not to be identified as the discussions are private.
The statistics ministry didn’t respond to requests for comment.
The issue is not limited to outdated numbers. Frequent revisions to existing data have added to frustrations, making it difficult to predict where one of the world’s fastest-growing economies is headed — and raising accusations among India’s political opposition that the numbers have been tampered with.
Data revisions in recent years made India’s growth appear impressive during a devastating cash ban. During a later revision, economic contraction from the pandemic narrowed, making the country’s recovery appear bouncier.
Kunal Kundu, a Societe Generale GSC Pvt. economist, said forecasting growth in India is a “hazardous task”, partly because the numbers are so elastic. Gross domestic product for last quarter surprised many when it came in one percentage point higher than estimates.
“The reason everybody got this wrong is the alarming regularity with which the data is getting revised,” he said.
Officials now avoid leaning too heavily on the government’s own figures. For instance, rather than use “bad data,” economists at the Reserve Bank of India are likely using a combination of intuition and inflation numbers to set interest rates, according to Sen.
“Monetary policymakers supplement official estimates with information on auxiliary variables to have a firmer assessment and minimise policy errors emanating from data revision,” RBI Governor Shaktikanta Das said in June.
India’s data collection problem has several roots. A staff shortage in the statistics ministry has slowed progress on the consumer expenditure survey, as well as conducting a new nationwide census, which hasn’t been updated since 2011.
The number of field investigators has also broadly remained stagnant since the 1970s, though India’s population has grown by several hundred million people. Today, loosely trained contractors are responsible for collecting the bulk of demographic information across India.
With national elections less than a year away, few analysts believe Modi’s administration will release sensitive data ahead of voting, particularly around issues like employment. The infusion of politics into data-collection has frustrated many of India’s top statisticians, who’ve emphasised that the nation can’t reach its growth goals if nobody knows what’s happening on the ground.
“There is a credibility crisis,” said P.C. Mohanan, the former head of India’s National Statistical Commission, who resigned in 2019 to protest the government’s decision to withhold a jobs report.
“In the absence of real and credible data, people will go for all kinds of interpretation and that is a problem,” he said. “Who knows what the right picture is, because there is no survey.” DM