redesigning-indias-ailing-data-system

The government has placed a draft National Statistical Commission (NSC) Bill for public comments.

Background: 

  • The government has come under fire for repeated instances of data suppression across ministries, including the delay in the release of Periodic Labour Force Survey for 2017-18,
  • The Labour Bureau’s survey on the number of jobs created under the Micro Units Development & Refinance Agency (Mudra) scheme will not be made public for another two months making this the third report on employment to be kept under wraps before the elections.
  • Also, the government has shelved a plan to release the Consumer Expenditure Survey results of 2017-2018, a leaked draft of which showed a decline in consumer spending in rural India.
  • The new series of Gross Domestic Product (GDP) figures with 2011-12 as a base, released in 2015, has been in controversy.

Recent changes in National income accounting: In India, GDP is calculated by the Central Statistics Office (CSO). CSO functions under the Ministry of Statistics and Program Implementation. The System of National Accounting (SNA) is designed to measure production, consumption, and accumulation of income and wealth for assessing the performance of the economy. 

  • The new methodology for estimating GDP:  Now the corporate affairs ministry’s MCA 21 database and 2011-12 as a base year, is being used for calculation of GDP It is a wide-ranging compilation of balance sheet data of lakhs of firms.
    • MCA-21 database was used on the recommendations of the Rangarajan Commission, which reviewed the Indian Statistical System in 2001.
  • GDP back series: The government has come out with a linked back-series of India’s growth numbers from 1950-51 to 2003-04, with 2011-12 as the base year, to align gross domestic product numbers from past years with the new internationally accepted methodology and facilitate comparisons.
    • Previously, the GDP was estimated based on the Index of Industrial Production (IIP) data from the Annual Survey of Industries (ASI). 
  • The merger of the National Sample Survey Office (NSSO) with the Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation (MoSPI).
    • So far, the National Statistical Commission (NSC), the highest authority of official statistics, had been exercising the functions as the governing council of the NSSO. 
    • The functions include deciding the subjects for coverage in each NSS round, formulating methodology, and overseeing the processing of data and the release of survey reports and unit-level data by the NSSO.
  • Govt. initiatives: The Standing Committee on Economic Statistics (SCES), has constituted three sub-committees: one for Periodic Labour Force Survey and time use survey; second for IIP and Annual Survey of Industries (ASI); and the third for Annual Survey of unincorporated sector enterprises and services sector data. 
  • Draft National Statistical Commission (NSC) Bill: 
    • It seeks to establish NSC as the nodal and autonomous body for all core statistical activities. 
    • The NSC shall have the power to review the statistical system of any government agency in the light of concepts, definitions, standards, methodologies, and established policies, and recommend measures for enhanced performance; to prescribe a code of practice. 
    • Along with retaining the advisory nature of NSC, the draft Bill states that the decision of the central government, whether a question is of policy or not, shall be final, a proposal which experts say goes against the long pending demand to grant more powers to the NSC.
    • Change in the composition of the Commission by replacing NITI Aayog Chief Executive Officer with the Finance Ministry’s Chief Economic Advisor as the ex-officio member along with giving member status to Chief Statistician of India from the current status of secretary to the NSC.
    • The Chairman and the members of the Commission shall be appointed by the central government on the recommendation of a search committee.
    • The Commission “shall in the exercise of its powers or the performance of its functions, be bound by such directions or questions as the Central Government may give in writing to it the draft Bill states that the government shall seek advice from the Commission on any matter relating to official statistics. 
    • A report on reasons for not accepting any advice of the commission shall be laid before Parliament or a state legislature for a total period of thirty days. 
    • All nodal officers designated in central ministries/departments /state government shall be professionally responsible to Chief Statistician of India on core statistics, the Bill said. 

Concerns:

As official statistics are a public good, giving information about the state of the economy and the success of governance, it needs to be independent to be impartial.

  • Toothless NSC: Bill in its present version will essentially turn NSC into a public sector undertaking with no powers of its own. There are fears that the merger of the National Sample Survey Office (NSSO) with the Central Statistics Office (CSO) is an attempt to make the NSC toothless and officially defunct.
  • NSC's role ends with the submission of good and timely data to the National Statistical Office (NSO). The National Statistical Commission (NSC) which has powers over and above the NSO, has a bigger role and can question delays in the release of data.
  • Demonizing data: when data gets suppressed and then gets leaked, the government’s reaction has been to actually demonize the data.
  • The present GDP series encountered serious problems for the price adjustment, specifically for the services sector contributing about 60% of GDP, in the absence of appropriate price indices for most service sectors. 
  • Price indices distorted real growth: The CSO uses a mix of consumer price index (CPI) (industrial workers), CPI (agricultural laborers), Quantum indices (indices based on the quantity of units of goods and services independent of the monetary values) and the wholesale price index (WPI) to blow up the nominal values at current prices into their constant price equivalents.
    • The deflators used in the new series could not effectively separate out price effects from the current value to arrive at a real volume estimate at a constant price.  
  • Defunct enterprises in MCA-21: The report based on a field survey of services firms showed that 16.4% of companies in the MCA-21 database were either non-traceable or closed, and another 21.4% were ‘out of coverage’ or misclassified.
  • Insufficiency in ASI data: ASI underestimates manufacturing growth in the GDP by up to one percentage point as about half the manufacturing companies registered under the Companies Act were not in the ASI list.
  • Unchanged approach: price and production indices are constructed using a fixed base Laspeyres Index, yield rate for paddy is estimated by crop cutting experiments, and the organization of field surveys for collection of data on employment-unemployment, consumer expenditure, industrial output, assets, and liabilities continue. 
  • Productivity and remunerative price of output are major concerns for agriculture.
  • The growing inequality and concentration of wealth: Monopoly power, inefficient input-output mix, dumping, obsolete technology, and production mix
  • Ignoring structural issues: The macroeconomic framework assumes symmetric income distribution as it focuses on a trend-cycle decomposition of GDP growth and a trickle-down effect for percolation of income.  
  • Key recommendations of the Rangarajan Commission and successive National Statistical Commissions faced stumbling blocks in implementation. 
  • No specific timeline for the release of data: As of now, the government does have a calendar for the release of data sets such as national accounts, Index of Industrial Production and inflation. But there is no specific timeline for the release of labor force statistics and consumption expenditure surveys. 

Way forward: Data is the new oil 

  • Release a quarterly calendar. The urban (PLFS) data is quarterly. Now the govt. Has been bringing them out in chunks rather than on a regular quarterly basis. 
  • Gathering data for the unorganised sector would be important for decision-making purposes.
    • For agriculture: It is necessary to collect data on factors such as soil conditions, moisture, temperature, water, and fertilizer use determining yield, the impact of intermediary and forward trade on farm gate price and so on. 
    • Data logistics: Along with GDP, we need data to assess competitiveness, inclusive growth, fourth-generation Industrial Revolution riding on the Internet of things, biotechnology, robotics-influencing employment and productivity, environmental protection, sustainable development, and social welfare. 
    • The need for a versatile data warehouse as a component of big-data technology. 
    • Data reforming committees should have the support of a dedicated team for audit, and the ability to implement decisions by cutting red tape. 
    • For efficiency and stability:  we need to have detailed data on how: markets clear, prices are formed, risks build-up, institutions function and, in turn, influence the lifestyle of various sections of the people. 
    • The alternative system must rest on two pillars: the micro-behavior of individuals, and the structure of their mutual interactions. 
  • Best practices: For example, Israel collects these data for analysis to support productivity. The initiative under e-governance enabled the capturing of huge data, which needs to be collated for their meaningful use for production of official statistics. 

Economy facts

  • The GDP deflator (implicit price deflator) is a measure of the level of prices of all-new, domestically produced, final goods and services in an economy in a year.

About MCA-21

  • MCA here stands for the Ministry of Corporate Affairs. MCA 21 is an e-Governance initiative of the Ministry of Company Affairs (MCA). It is envisioned to provide anytime and anywhere services to businesses.

What is the GDP back series?

  • After the base year is changed, the GDP in previous years is revised according to the new base year for a fair comparison. The back series that the government released adjusts GDP numbers for fiscal years 2005-12 using new methodology with FY12 as the base year.

The Annual Survey of Industries (ASI) is the principal source of Industrial Statistics in India. The data includes evaluation of the Principal characteristics of factories, employees, capital, net, and gross value, benefits and funds, etc over a period of time on an annual basis.

The proposed National Policy on Official Statistics suggests discontinuing the role of the Chief Statistician of India as secretary to the National Statistical Commission (NSC) and with the usage of the terms CSO and NSSO Instead, the two will be treated as being under a single entity called the National Statistical Organisation (NSO).

Also readGovt To Release Withheld Periodic Labour Force Survey For 2017-18

Redesigning India’s Ailing Data System