Why junking job and consumption surveys does economy more harm than good

These studies are the only kind in the country to deliver information on a wide range of economic metrics vital for policymaking and implementing welfare schemes

The government recently junked its flagship survey on consumer spending by Indians, which it had conducted between July 2017 and June 2018. The survey had shown that an average Indian spent less in 2017-18 on essential food and non-food items such as clothes, medicine, television sets and transport, than what she spent in 2011-12.

The scrapping of the report has created a furore among observers of the Indian economy and society, due to some critical reasons: it is the only survey in India that gives details on item-wise consumption of all classes of Indians, from rural to urban, from the poor to the rich. Further, consumer spending is the closest proxy to incomes of Indians, and in the absence of hard data on incomes, the survey forms an essential trove of data for ascertaining the economic well-being of the citizens. It also serves as a vital input for policymaking in India, especially welfare schemes.

The survey was junked despite the fact that its sample size was nearly 500,000, or five times that of the previous consumer spending survey of 2011-12, where it was a little more than 100,000.

Survey funding and methodology

But who generates these reports which are of utmost importance for the country? What kind of funding does the institution get? What is its legacy?

The parent ministry that conducts the surveys, generates statistics on national income accounts and other data on the macro-economy, is the Ministry of Statistics and Programme Implementation (MoSPI). As the name suggests, the ministry has two distinct parts totally unrelated to each other: while one generates key statistics on the economy, the other monitors important central sector projects, mostly on infrastructure and the core sector, and the implementation of local area development schemes by members of parliament (MPLADS).

Surprisingly, about three-fourths of the funds allocated to this ministry by the Union Budget are spent on programme implementation, leaving the smaller pie for national statistics, surveys and other heads. In the current Budget (2019-20), as against allotment of nearly Rs 4,000 crore towards the MPLADS funding, Rs 900 crore has been allocated towards the National Statistics Office and for conducting the 7th Economic Census.

Now, the statistics wing has a few clearly defined areas where it generates exclusive statistics for the country. These are: National accounts, price statistics, economic statistics and social statistics, in addition to two most important surveys, the national sample surveys and the annual survey of industries. The National accounts division calculates the gross domestic product (GDP) of the country, the sectoral contribution to the gross value added (GVA) in the economy, and also gives an estimate on the contribution of investments (productive and income generating) and consumption to economic growth. It is this department that told us about the slowing down of the economy, at 5 per cent in the June quarter of this financial year.

The price statistics division produces the monthly series on consumer price index, which generates the only estimate on consumer inflation in India. It is this wing that told us that consumer inflation is on the rise due to the rapid increase in food prices in recent months. The social statistics division determines through surveys and secondary statistics, the state of health, education and environment in India.

The most important economic statistics wing produces the monthly Index of Industrial Production. The IIP forms the backbone of the quarterly estimation of economic activity in the manufacturing sector. It is the only high-frequency indicator that gives us an indication of industrial health on a regular basis. This wing is also responsible for the periodic Economic Census of India. This Census records each and every enterprise in India, similar to the population census, which records data on each and every person in India. This Census provides the basic frame for the computation of the GDP in its annual exercise. The Ministry is currently working on the 7th Economic Census. The 6th EC of 2013 showed that there are 59 million establishments in India employing 131 million people.

The annual survey of industries is a survey of nearly 250,000 factories in India, and is the only detailed survey data on factories in India, giving us information about wages, their share in value added, profits, productivity and sector-wise changes in sub-regional economies. The ASI covers establishments that employ 10 or more workers with power or 20 or more without power.

Now, to the national sample surveys. Apart from these critical statistics about India listed above, the MoSPI conducts sample surveys, which are the exclusive source of data on farmer incomes, consumer spending, employment and unemployment, health and education, and most importantly, the unorganised sector in the economy. No other source gives us that kind of data.

Till date, the ministry has come out with more than 500 survey reports. Put together, these reports give the only data on income, consumption, and employment over the past 50 years.

Further, accurate estimation of GDP is impossible without these surveys. The consumer spending survey forms the basis for the private final consumption expenditure (PFCE) part of the national accounts. The PFCE forms more than 50 per cent of India’s GDP.

“The consumer spending survey has a limited role in national accounts statistics, and serves as an input for estimating consumption. It’s importance in poverty estimation, however, is unparalleled. However, the Economic Census forms the frame for all the surveys, especially the informal sector survey, that follow,” says P C Mohanan, former chairman of the National Statistical Commission. The NSC was established in 2006 for a better coordination between all statistical agencies. The Union Budget 2019-20 has earmarked Rs 250 crore for the 7th Economic Census.

The survey on unorganised sector is important due to two factors: the sector contributed 90 per cent to the overall employment in the country, and about 45 per cent to the GDP, or the economy. In the computation of the national annual GDP in the national accounts series, the informal sector is not measured. Various ratios are used to compute output and value added in the informal sector, and it is this survey that gives these ratios.

Having said that, the Programme Implementation wing is not a secondary wing of the ministry. It monitors all the projects by the government of India in major infra sectors such as power, irrigation, roads, and fertilisers.

In terms of using the funds provided by the government, the ministry uses more than half for capacity building of the National Statistics Office, and the rest for regular activities, such as survey and accounts standards, modernisation of India’s statistical system, salaries of officers and survey expenses, including new technologies.