Data blackhole in Q1 2020 would challenge govt policymaking and corporate decisions

Economists, statisticians and analysts are bracing for a massive data void in the first quarter of the calendar year, an issue that could severely impact decision making at government, firm and individual levels. Data crunchers are preparing to work for an extended period with assumptions, proxies and plain guesses.

Pronab Sen, who chairs the Standing Committee on Economic Statistics mandated to review the framework for economic indicators of industry, services and labour, estimates that about 60% of the Indian economy is shut down. Sen’s estimate, in the absence of hard data, is based on the assumption that whatever is defined as essential would continue in full force and goods and services required for backward linkages to provide the essentials would be produced, delivered and consumed.

Some of the major nationwide data collection exercise have been called off for now. Sen, who is India’s former chief statistician, says three major field surveys have been disrupted. The biggest and most comprehensive is the 7th Economic Census which, according to a note of the ministry of statistics and programme implementation, would cover households and establishments engaged in non-agricultural economic activities. The others are multi-indicator surveys used to help monitor progress in achieving the United Nations’ Sustainable Development Goals or SDGs, and the tourism survey.

"The disruption in itself is not permanent damage to the economic survey," according to Sen. The 7th economic survey had intended to create a nationwide business register of global standard by ascertaining number of establishments, tagging them by their geolocation, number of workers and local economic variables. The exercise would be delayed but unlikely to be erroneous. That is not the case with the other two, however. "They have a very strong seasonal element. If you don’t get it for the full year, the data becomes junk,’’ Sen told ET over phone.

Economic activity has been sharply decelerating in the past few weeks as businesses shut down, public transport ground to a halt and people remained home-bound. With prime minister Narendra Modi announcing a three-week total `curfew-like’ shutdown, the economy is paralysed. "You can say this is a dead zone,’’ says a senior economist at a public institution who did not want to be identified.

A dataset that could become problematic is that of prices. "Factory gate prices and the time series would not be representative. It would not be a simulation of demand and supply,’’ he says. Information that feeds the Consumer Price Index is collected shop to shop which is not possible now.

While the big national surveys and census are done by the government, several private agencies, researchers and organisations are also faced with disruption in data collection. Mahesh Vyas, CEO and Managing Director of Centre for Monitoring Indian Economy (CMIE), says this disruption is bigger than demonetisation and its impact would linger for a longer period. CMIE, which heavily depends on house-to-house surveys for data collection is exploring new ways to continue with surveys. "We have to do a total process re-engineering, find good proxies and rewrite validation systems,’’ Vyas says.

Unavailability of data would have implications for firm and individual level decision making. "This is a Black Swan event. Firms can plan for risk. But what we are facing is uncertainty not risk. Current forecasting techniques and methods would be useless,’’ according to Prateek Raj, assistant professor of strategy and young faculty research chair at Indian Institute of Management, Bangalore. Raj says true uncertainty leaves firms clueless. Government-supplied data, while important, would not be enough anymore. Firms would have to constantly search for signals in other data such as Uber orders and Amazon deliveries. ``What they would need is an ensemble of data from various sources.’’

Although lack of data creates issues and affects decision making, some consider it as an opportunity to get out of "bad habits". The senior economist quoted earlier says stable data leads to complacency and belief in numbers over evidence can be counter-productive. He hopes lack of data would force the government to move away from making policy based on numbers. He says fundamental changes would be required if there is a radical shift in the composition of the GDP when the pandemic is over. For example, since a large amount of resources is being routed to healthcare what will happen to the extra capacity being built up now. Similarly, companies will have to think about where they will deploy fresh capital. He sees Mahindra group’s announcement that it would make ventilators as a sign of this shift.

IIM, Bangalore’s Raj says experience from the 2008 economic meltdown showed that firms that were more decentralised and whose local managers were empowered coped better after the crisis. A similar experience may be in store now as well for both firms and governments although the trend in India seems to be towards centralisation.