Shooting the messenger

Rejecting CES data undermines India’s statistical system

On Friday, the government rejected the Household Consumer Expenditure Survey (CES) 2017-18, conducted by the National Statistical Office (NSO), because of data quality issues. The same morning, the Business Standard had published leaked findings of the report, which showed that real average consumption had fallen between 2011-12 and 2017-18.

The government said that a new CES would be conducted around 2020-21. Policymakers will, thus, not have access to consumption data for more than a decade. The decision undermines the statistical system and complicates policymaking.

Once a survey has been commissioned and its design approved, the only valid reason to reject its findings can be an error in data collection. Any other objection, such as sample design and questions, ought to have been flagged earlier. The 2017-18 CES had exactly the same design as previous ones. So, questioning the current findings is tantamount to discrediting the earlier surveys as well. The divergence between NSO and National Account Statistics (NAS) data, which the government has cited as a key reason for rejecting the report, is not new. Many economists, such as Nobel laureate Angus Deaton, have warned against trying to attribute all the errors to NSO numbers. At a time when many independent economists believe that there is an overestimation problem with India’s GDP statistics, Mr Deaton’s cautionary note is even more important.

2017-18 was not a normal year for the Indian economy, with demonetisation and the imposition of the Goods and Services Tax (GST) inflicting back-to-back disruptions. The economy has been in a protracted slowdown since then, with the GDP growth declining for five consecutive quarters. The impact of these measures on the economy, especially the informal sector, which provides the bulk of employment, is still not clear. What if the consumption trends in the 2017-18 survey have persisted? Anecdotal accounts of rural distress and consumer sentiment being tepid abound. Private consumption, which accounts for more than half of India’s GDP, is the biggest driver of growth in India. The CES numbers would have provided much needed clarity in devising policies to address the economic slowdown. By rejecting the CES, the government is only shooting the messenger, and making the task of informed policymaking more difficult.