India

Why You Can't Trust the Facts on India's Economy


Why You Can't Trust the Facts on India's Economy

Photograph by Daniel Berehulak/Getty Images

In the public imagination, India is a country of contrasts: We’ve become accustomed to evocative photographs of slums below skyscrapers, headlines on malnutrition next to stories on stock market rallies. Yet we know little about the true state of India’s economy, in part because data about it remain opaque. The unreliability of information in India is a major factor that impedes the crafting of policies that can strengthen the links between growth, poverty reduction, and development.

Take poverty. According to official figures of the Indian government, 37 percent of India’s population is poor. The World Bank, however, says 42 percent are poor, and estimates from various other parts of the government range from 27 percent to 80 percent. The differences among the numbers stem from the disparate answers to two questions: What does it take to survive, and how much does that cost? Just as there are varying opinions on the amount of calories required for survival, there are also a number of accepted ways to price whatever this bundle of “just enough” turns out to be.

Despite the range of poverty estimates, policymakers still have to pick one. The official, 37 percent poverty estimate is hardwired in fiscal federalism and the social safety net. Until last fall, the official figures were used to set a limit on the number of people who could be designated “Below Poverty Line” and thus eligible for many national and state antipoverty programs. The deputy chairman of the Planning Commission and the Minister of Rural Development (the bodies in charge of counting the poor and identifying them, respectively) have jointly committed to changing this practice, but it’s not clear what will replace it.

Whether or not inequality is rising is also a matter of interpretation. Consumption inequality appears to be widening, but it’s nearly impossible to tell how big the gap between rich and poor really is. The consumption data, for instance, underestimate the income of the richest, but we don’t know by how much. Most estimates of wealth inequality come from surveys on debt and investment taken every 10 years; the last one was in the early 2000s. One provocative analysis of financial equity, real estate, and gold—instruments mostly available to the already well-off—did show that the jump in wealth from 2002 to 2006 was larger than India’s total GDP.

The size of India’s “informal” economy, meanwhile, handicaps efforts to track the number of Indians who are gainfully employed. Four out of five urban workers—who collectively produce an estimated three-quarters of the country’s output—are informally employed. That means their work does not show up in official figures on productivity, innovation, social mobility and other standard metrics of progress. It’s possible to debunk some of the myths about India’s work force—three-quarters of self-employed workers in urban areas, for example, are in single-person businesses or family enterprises without hired labor, rather than upwardly mobile entrepreneurs—but a clear picture of exactly how many Indians are working, and where, remains elusive.

On migration, India’s two nationally comprehensive sources of information, the Census and National Sample Survey, suggest a country of middle-class, middle-educated people moving for marriage and economic opportunity. But these sources don’t count or contain any details on shorter-duration, “circular” migration, in which workers relocate for work temporarily and then return home. Rough estimates based on figures from industries that employ migrants—industries that are themselves often informal and somewhat opaque—find that another 100 million people are “on the move” in India. Microstudies of migration from academics and NGOs suggest that these numbers are increasing, as transportation, communication, and financial infrastructure (for remittances) improve. These are often the least-educated and poorest of lower-caste people, for whom temporary and part-time work away from home is a harrowing but possibly viable route out of poverty.

Taken together, the lack of hard numbers removes the basis for constructive debates about how to address India’s economic and social challenges. Statistical uncertainty provides grist for prognostication—you can just as easily make a case that a rising tide will lift all boats as you can find evidence that India’s already sinking. But it’s impossible to craft effective policy that way. The broad contours of India’s problems are clear, but the room for haggling over the not-so-fine details relieves the pressure to address them.

Jessica Seddon is a fellow at the Council on Foreign Relations

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