Deepak Mohanty: Statistics and the Reserve Bank - some reflections
Opening remarks by Mr Deepak Mohanty, Executive Director of the Reserve Bank of India,
at the Annual Statistics Conference 2012 of the Reserve Bank of India, Chandigarh,
17 March 2012.
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Deputy Governors, Dr. Subir Gokarn and Dr. K. C. Chakrabarty; distinguished statisticians
and economists from the academia; Regional Director Chandigarh; heads of select
departments; Shri A. B. Chakraborty, Officer-in-Charge Department of Statistics and
Information Management (DSIM) and friends. I extend a warm welcome to you all to the
Annual Conference 2012 of the Department of Statistics and Information Management
(DSIM). For the first time, this conference is organised outside Reserve Bank of India (RBI)
which provides an informal atmosphere for bonding and brain storming needed for a
research conference like this. This conference provides a platform to the officers of DSIM to
present their research work before the experts and receive their feedback in order to make
analysis more meaningful for policy and research. I thank the distinguished professors who
have consented to discuss various papers presented by my colleagues in DSIM: Prof. Manoj
Panda (CESS, Hyderabad), Prof. N. R. Bhanumurthy (NIPFP, New Delhi), Prof. Subrata
Sarkar (IGIDR, Mumbai), Prof. Surinder Kumar (CRRID, Chandigarh), Prof. Mahajan (Punjab
University, Chandigarh), Prof. Chetan Ghate (ISI Delhi), Prof. Shalabh (IIT Kanpur). You all
bring together plenty of expertise and experience in the field of theory and practice of
statistical research for economic policy making which is of great value to us.
Statistics as a method of systematic learning from observation and experience has been
practiced for centuries. India has a distinction of starting early in compilation of economic
statistics for analysis and policy making. Of late, however, there have been some concerns
over the quality of economic statistics. This underscores the need for renewed focus and
greater organisational efforts for improving the quality of official statistics.
Statistics is a public good as it is necessary for empowerment of citizens. Today most of the
economic analysis has statistical foundation. Therefore, a solid statistical grounding and
soiling the hands with data are basic prerequisites for the making of a good empirical
economist. This is evident from the presence of many eminent economists amongst us in this
conference. Actually, many renowned economists started their career as statisticians. For
example, Professor Milton Friedman, Nobel laureate and perhaps the most celebrated
monetarist economist of the past century began his career as a statistician in Washington
DC. Nobel laureate Simon Kuznets presented a more scientific approach to macroeconomic
analysis by laying the foundations of national accounts statistics.
Central banking today is more challenging than ever and availability of reliable and timely
information is the key to effective policy making. As a central bank, we are responsible for
generating various macro-financial statistics collected both from primary and secondary
sources in the process of implementing our policies. As the Reserve Bank boasts of one of
the largest body of statisticians in the country, let me start with the role of statisticians in our
organisation and highlight the achievements and challenges for DSIM.
The statistician in the Reserve Bank performs a multifarious role. DSIM provides statistical
service by way of collection, compilation, analysis and dissemination of information relating
to monetary, banking, corporate and external sectors. Another major area of focus is to
provide inputs for policy formulation, conducting surveys and to carry out research activities
in conformity with the needs of the Bank. Over the years, it has widened its scope and
spectrum of data collection and dissemination. A key achievement in this regard is the
improvement of the Bank's web enabled Data Warehouse, popular among the researchers
as Database on Indian Economy (DBIE). Today various flagship data publications of the
Bank like the Handbook of Statistics on Indian Economy originate from DBIE. A large amount
of downloadable data is made available as a public good on near real time basis on the RBI
website. I am happy to note that a more user friendly version of DBIE is being released
today.
Towards information management and dissemination, the system of data submission under
the Online Return Filing System (ORFS) is further strengthened. At present, 40 returns of
various departments like DBOD, DBS, FED, FMD, DPSS and MPD are submitted using this
platform. At the same time, the Extensible Business Reporting Language (XBRL) project on
the standardisation in the reporting of financial data has made considerable progress during
the year with 42 returns taken up for implementation.
During the last one year, the Department has made considerable progress in identifying and
filling data gaps. This includes implementation of Co-ordinated Direct Investment Survey
(CDIS), extension of Master Office File (MOF) with population census and economic census,
development of service price and production index for banking service, construction of house
price index, collation of time series data on rural wages1, system of Loan Registration
Numbers (LRNs) for ECBs under automatic route.
The research activities of the Department encompass economic measurement, analysis,
modelling and forecasting of economic growth, inflation, corporate performance and other
macroeconomic indicators and capturing economic agents' response to expected macro
developments for forward looking monetary policy formulation. Based on various univariate
and multivariate models, growth and inflation projected path is presented in the form of fan
charts. With inflation running higher than RBI's comfort level for the last two years, the
analysis of growth-inflation trade-off carried out by the Department was particularly useful for
calibrating monetary policy actions.
The surveys conducted by the Department particularly on macroeconomic changes continue
to provide valuable inputs for forward looking monetary policy formulation. These include
Industrial Outlook Survey (IOS), Order Books, Inventories and Capacity Utilisation Survey
(OBICUS), Credit Conditions Survey (CrCS), Inflation Expectations Survey of Households
(IESH), Consumer Confidence Survey (CCS) and Survey of Professional Forecasters
(SPF).Key findings of most of these surveys are now published on the RBI website
simultaneously with the Macroeconomic and Monetary Developments every quarter. This
has increased visibility of our survey output and has improved considerably the timeliness in
dissemination of survey results. I am sure availability of these surveys now in public domain
will spur research in these areas.
Understanding asset price developments has gained increasing importance, especially after
the global financial crisis. In this context, the Department has made considerable progress in
compiling House Price Index (HPI) based on registration price. The coverage has increased
to nine cities now. Regional offices of DSIM are making important contribution towards this.
Further, in order to complement this, the Department has introduced an Asset Price
Monitoring System (APMS) based on housing loan account information as available with
banks. Financial stability analysis is another important focus area of RBI. I am happy to note
that the Department is making important contribution in this area by providing inputs such as
financial stress indicators and asset prices.
Notwithstanding the achievements, let me share a few challenges for the Department going
forward.
First, in the wake of financial crisis, quality and timely availability of statistics has become
essential. The information and analytical requirements have become more diversified with
added emphasis on financial stability. With structured monetary policy reviews becoming
more frequent, the need for high quality and frequent forward looking information has
increased. At the same time, application of statistics in solving operational issues has gained
increasing importance. These developments have contributed to the demand for trained
statisticians across the departments of the Bank. The Department, being the second largest
pool of statisticians after ISI in the country, must rise to the occasion to serve the
organisation better.
Second, as central bank of the country, we have the responsibility of providing a sizable part
of macro-financial statistics. Our publications have a standard that provides confidence to
data users. Even for secondary data like price statistics, users prefer to consult RBI
publications. Therefore, the responsibility of maintaining data quality, timeliness and making
data meaningful inevitably falls on DSIM. The Department should make greater use of
technology to validate and improve data quality.
Third, there are some surveys on macroeconomic changes which have not progressed to our
desired level of satisfaction. We have made a beginning on collection of data on trading
sector and employment opportunities of fresh graduates. But we need to expedite and bring
out these survey results soon. Another important indicator which provides early signs of
overall economic activity is retail sales. A quarterly survey on retail sales across cities may
be initiated with the help of regional offices.
Fourth, the Department is involved in various data gap and statistical measurement issues
through its participation in various committees within and outside the RBI. One particular
issue, that has received renewed attention across the globe in view of the complexity of
inflation dynamics, is measurement of prices - commodity prices, consumer prices and asset
prices. In recent years, there is greater institutional effort for improving measurement of
prices in India. We have a new CPI (rural, urban and combined) now. The base of WPI was
also revised. There is, however, considerable scope for improving the coverage and
reporting of prices data besides research on measurement of prices and inflation, in terms of
commodities/asset classes, stages of production as well as various sectors and regions. Now
that we have a more representative CPI series, institutional efforts need to be directed
towards compilation of a Producers Price Index (PPI) as well as a Service Price Index.
Fifth, regional market intelligence or statistical intelligence plays a pivotal role in providing
important inputs to monetary policy making. For example, the Bank of England (BoE) has
established a regional statistical data collection system covering as many as 25 indicators
including business conditions, price variation, labour and employment. These are different
from the qualitative surveys. Information so collected is analysed and transformed into
scores which forms an important input in the deliberations of the Monetary Policy Committee
(MPC) of the BoE. India is a country with significant regional variations. Hence regional
inputs are valuable for policy making. With its reorganised structure and envisaged wider
presence of regional offices in major centres, the Department may put a similar system of
gathering relevant statistics and market intelligence, particularly in the area of prices and
agricultural conditions to aid policy formulation at the national level.
Sixth, as a part of the on-going work with DCM on forecasting of demand for currency and
coins, it is necessary to conduct focused regional surveys relating to (i) availability/shortages
of coins/currency notes, (ii) regional practice and usage of currency notes, and (iii) estimation
of counterfeit currency notes in the system. In addition, the regional offices of the Department
could be directly involved in conducting surveys on financial inclusion, particularly
assessment of financial inclusion outcomes in the villages following the outreach programme
of the Bank.
Seventh, the Department has noticeable presence in a number of central office departments,
like Department of External Investment and Operations (DEIO), Monetary Policy Department
(MPD), Internal Debt Management Department (IDMD), Department of Information
Technology (DIT), Department of Payment and Settlement Systems (DPSS), Department of
Banking Supervision (DBS) and Financial Stability Unit (FSU). It is desirable that our officers
in these departments provide analytical inputs for policy and operational issues and come out
with research papers. These papers could be presented in conferences and published
eventually in the RBI Working Paper Series. This will make research more valuable in
furthering our organisational objectives.
Eighth, focused and determined approach to research across various units, including the
regional offices, should be pursued so that research agenda being adopted by the
Department is accomplished in a timely manner. For data management and dissemination,
technology must be harnessed to its fullest extent. There is also a need to strengthen the
modelling and forecasting capabilities towards developing a full fledged forecasting suite
including DSGE models.
Finally, I congratulate the Department for its many achievements. However, there are
challenges ahead, to some of which I have drawn your attention. As noted statistician
John Tukey once observed, "An approximate answer to the right problem is worth a good
deal more than an exact answer to an approximate problem." I see the demand for statistical
skills and statistics in the Bank growing as we grapple with many questions. I hope the
deliberations of this conference will bring academics and policy makers closer and lead to
strengthening our statistical analysis and system. I wish the conference all success.
Thank you.