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tca-anantTHMB.jpg Demonetisation picture to be clearer towards 2017-18 end: Chief Statistician

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Meghna Mittal | 14 Jun, 2017
While the jury is still out on whether last year's demonetisation has harmed the Indian economy, the government's Chief Statistician maintains that the picture will become clear in the current fiscal only after data from the government and company accounts come in.

He maintains he has reservations about "making quick" judgements about the note ban decision that had affected the economy at multiple levels, and that it should not be seen just from the perspective of cash replacement, but as one that produced many benefits too.

"What people do is that they make assessment of the (demonetisation) policy on the assumption that the policy is done and all the effects have worked out in the system and you know what the outcome is. It's not so simple. Data is going to keep coming," Chief Statistician T.C.A. Anant said in an interview.

"I will get more data pertaining to that period. I will get complete government accounts pertaining to that period in more detail by August when the Controller General of Accounts (CGA) completes it, of state governments in another few months and company accounts of that period in another 3-4 months. All of that will happen," Anant said.

He said that demonetisation has affected the economy at multiple levels and its effects were still working out in the system. "It's a policy which has influenced the economy through a number of channels. These influences are still being worked out and will continue to be worked out in the system."

He said the impact of demonetisation could not be summarised in a short two-month picture. "As a statistician, I will need to see the trajectories and work out the analysis and then give an answer. I will respond purely as a statistician, examining the data and telling you what that means," he added.

Moreover, the Annual Survey of Industries (ASI) data, which can be used as a proxy for the unorganised sector, will be replaced with Index of Industrial Production (IIP) in the GDP but only by 2018-end. "ASI data for 2016-17 will be available around December 2018. That will be used in GDP also as and when it becomes available," he said.

However, Anant said that the demonetisation policy was not only about the transitional effects of cash replacement and its benefits are still under way as it has influenced electronic transactions, the way people report taxes and also the way the tax department interacts with taxpayers.

He said it would be a mistake to equate the policy simply with the measure of cash replacement. "The policy had many dimensions. The policy has actually influenced behaviour. If you look at the data of electronic transactions that RBI compiles, it is continuing to grow. If you look at the overall trajectory of growth post-November to pre-November, there has been a distinct structural break. It is only one of the behavioural changes that demonetisation has induced," he said.

"Some of the processes are still under way. We will continue to see the benefits of that not only this year, but also in the next. When you say this is the impact of the policy, do you want to exclude these beneficial impacts?" he added

On being asked about his reservations on demonetisation, he said that as a statistician he needs to be more analytical and cannot make quick judgements.

"Yes, I have reservations because I do not like to make quick judgements about demonetisation. My experience in social sciences and statistics tells me that whenever we do so, we make horrible mistakes. We need to be much more analytical and more reflective. I will not react to people who have a particular ideological view or perspective. It is not my job."

On the upcoming new indirect tax reform of Goods and Services Tax (GST), Anant said that from the statistical point of view, it would improve the quality of data as it would plug leakages in the sales tax regime.

"There will be some change in data collection. What we will gain in GST is that we will get more complete data of the transactions being covered. In GST, since we will be picking up from point of production to the point of sale, our picture will become better. So improvement in quality of measurement along with the linkage with informal activity will actually make GDP compilation better. I am hopeful that it will in fact improve the quality of data," he said.

"The revenue implications may be different. But so far as data implication is concerned, we will track an item being sold up to the previous point of sale. So we will get those volumes far more accurately. There is incompleteness currently, sales tax regime being different in different states and we are not sure whether everything produced and sold in the country got picked up. Leakages issues were raised by people in sales tax," he added.

In the wake of criticism that GDP calculations failed to measure the impact of demonetisation on the unorganised sector, the government's Chief Statistician prefers a regular and timely sample survey over which discussions are already on with technical experts.

"Yes, we do have a direct measure of the unorganised sector in the GDP calculations. The least direct in the unorganised sector is manufacturing. I do not get regular estimates of the data. I only get it through sample surveys which happen only once in five years," Anant said.

"Therefore, ideally, we would like to have a sample survey which would capture unorganised manufacturing more regularly. This is something that will be needed to be thought about and as a Chief Statistician, I think it's the direction we are likely to go in future. It is being discussed with technical experts," he said.

He said that the proposal on a more regular unorganised sector survey is yet to be placed before the government at a formal level. "Converting the technical discussion into a proposal that is formally considered by the government is a process. There have been discussions, I won't say at a formal level."

He said that he cannot put a timeline to when it would happen as the designing of an annual survey is a cumbersome process and the instrumentalities and design need to be worked out along with the resources.

"Regular surveys are more complex to design. An annual survey is quite a cumbersome task. But it's worth considering. How long will it take, what will be the resource will need to be worked out," Anant said.

The Chief Statistician said that the challenge was not of resources but of coming up with a compatible time series.

"Regular surveys are possible. From the viewpoint of conducting quarterly surveys in the field, the answer is yes, give me resources. But what design should I follow so that the numbers that come up constitute a time series that is compatible. There needs to be coherence in design that permits a time series to come up. That is partly a resource and partly a statistical problem," he said.

"Let the people who are experts in the field come up with suggestions (and we will see) how they can be operationalised. It is being discussed," he added.

In the GDP calculations, the informal sectors in agriculture, retail trade and construction are well covered in the sense that there are data directly related to their activities. But there is no regular direct measure of unorganised sector manufacturing.

NSSO Enterprise Survey is a direct measure of unorganised manufacturing, which is conducted once in five years. The last survey was done before demonetisation in 2015-16.

In agriculture, there is direct data collection on acreage, yield and cost of cultivation that is supervised by the Agriculture Ministry.

The second part of informal sector is trade for which data is available by the volume of retail trade activity for sales tax. Small traders also pay sales tax because the method of sales tax collection implies that every item sold gets into the tax net.

For informal trade in the construction sector, the government makes an assessment on the basis of inputs used like cement, steel and other construction material.

(Meghna Mittal can be reached at )
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