The Reserve Bank of India (RBI) advisory group on data dissemination said that it is not possible to comply with the special data dissemination standard (SDDS) of the International Monetary Fund (IMF) on currency composition of foreign exchange holding and the maturity break-up of forward liabilities of the central bank.
Referring to this as a 'sensitive issue', the group said, "One of the major concerns of a central bank is to maintain the stability of the domestic currency's exchange rate. It is an established view that if central banks reveal their full position to the market in the name of transparency, the intervention will not be effective as the market will precisely know the striking power of the central bank."
"Full transparency in forward liabilities of the central bank would reveal positions to the market players and in the process reduce the effectiveness of intervention operations," the group added.
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The advisory group, which under the chairmanship of A Vaidyanathan has submitted its report to the standing committee on international financial standards and codes chaired by Y V Reddy on May 23, feels that India is already fully compliant in respect of practically all items in the SDDS.
The group views that the data disseminated by India on its employment-unemployment trends are sufficiently scientific and well received though may not be in line with SDDS.
"... the kind of quarterly data that the SDDS proposes on labour market (employment, unemployment and wages/earnings) using the Indian Labour Organisation (ILO) sophisticated concepts, definitions and classifications, are impossible of generation if only because of the large agricultural sector and also of sizable unorganised segments in the non-farm sector," said the advisory group .
The group, however, suggested that dissemination arrangements under SDDS would have to be strengthened with hyper-links between various data sources in India and IMF's electronic bulletin board, and suggested that the state government, central statistical organisation and RBI should work together to facilitate better data dissemination.
The special data dissemination standard (SDDS) was established by the IMF in March 1996 to guide members that have, or that might seek, access to international financial markets in the dissemination of economic and financial data to the public. Subscription to the SDDS was opened in early April 1996.