duvvuri subbarao : statistics and statistical analysis in reserve bank of india ’ s work address by dr duvvuri subbarao, governor of the reserve bank of india, at the sixth annual statistics day conference, reserve bank of india, mumbai, 17 july 2012. * * * statistics day at rbi the statistics day conference, held to honour the memory of that doyen of statistics, the late prof. p. c. mahalanobis, has become an important event in the reserve bank ’ s annual calendar. since statistical analysis is a critical input for the reserve bank to deliver on its mandate, we have found this annual conference to be a very valuable learning experience. 2. i want to acknowledge the presence here of several leading experts in statistical analysis in economics : prof. r. radhakrishna, chairman, national statistical commission ; dr. aurel schubert, director general, european central bank ; prof. j r varma, iim, ahmedabad ; prof. probal chaudhuri, isi, kolkata ; and prof. amit bubna, isb, hyderabad. a hearty welcome once again to all of you. inherent uncertainty in real world statistics we know that uncertainty is inherent in the field of economics where outcomes are shaped by human behaviour. as i said on another occasion, i cannot change the mass of an electron by my behaviour, but i can certainly expect to change the price of a derivative by my behaviour. one of the charges against economists in the context of the crisis has been that they suffered from “ physics envy ” which led them to build elegant models, using sophisticated mathematics and impressive statistical finesse, deluding themselves and the world at large that their models have more accuracy and predictive power than they actually did. forgotten in this misguided quest for precision was the fact that economic outcomes are a function of human behaviour which, contrary to one of the fundamental assumptions of economics, is not always rational. also economic systems are reflexive in the sense that beliefs about what will happen often influence what does happen. in the recent announcement of the discovery of the “ god particle ” – the higgs boson – the european lab, cern said that its level of certainty was 4. 9 sigma, implying that physicists came tantalizingly close to the “ gold standard ( 5 σ ) ” – or one in 2 million chance of the result being a random fluctuation or noise. we cannot even dream of such precision

steps to mitigate the following : a ) smurfing : the possibility of accounts being used as conduits for money laundering cannot be ruled out through a process known as “ smurfing ”, a process by which amounts are split below the threshold level of rs. 50, 000 / - to fly under the radar and thereby prevent detection. bis central bankers ’ speeches b ) accounts being used as money mules : accounts of vulnerable individuals may be used by third parties to launder money is another possibility regarding which the banks should be careful of. c ) opening of multiple accounts : in the recent financial inclusion drive, multiple accounts have been opened by applicants in the hope that they would get an additional rupees one lakh insurance cover for every account so opened. however, if the applicants were to open different accounts in the same bank, using different documents like aadhar card, pan card, passport etc., with slight variations in the manner in which their names are written, de - duplication may not be possible. the problem gets compounded if an applicant opens multiple accounts in different banks. section 6 conclusion and way forward let me conclude by repeating what i have endeavoured to convey about the role of financial sector in spurring growth and expanding financial inclusion in ner. i began with a brief introduction of the subject and provided the unique features of the ner. thereafter, progress achieved in financial inclusion is discussed to assess where the ner stands at the present juncture. trends in economic growth of ner were analyzed to indicate the performance of ner. thereafter, the roles of governments and financial sector regulators in spurring growth and expanding financial inclusion in ner have been discussed, along with caveats to be observed while opening accounts by the financial institutions. it must be reiterated that synchronised and simultaneous efforts by the governments and financial institutions cannot be overemphasized in the context of ner. thank you. annex recommendations of committees / reports a. usha thorat committee on financial sector plan for ner major recommendations made by the committee are as under : • the banks may draw up plans to provide at least 50 new households per branch each month for the next four years with a deposit account. • banks could introduce a pilot project in the rural and semi urban segments closest to the bank branches by customising simple deposit and credit products to suit the needs of the households. • to encourage the flow of credit through general credit card ( gcc