The Hindu Business Line : The importance of information standards

A mass of statistical data does not mean information standards, which involve classifications and codes, statistical units, extent of coverage, methods of measurement of economic phenomena, and the logic of inclusion or omission of certain items. In India, the RBI does this best, but other organisations need to evolve and meet information standards to improve their functioning, credibility and accountability, says A. VASUDEVAN.

Budgets may come and go but information standards will have to go on forever. Unfortunately, however, the spirit behind the idea of information standards is not as yet fully appreciated in India. Often these standards are taken as met if large quantities of statistical data are provided in the publications or web sites of organisations.

The large amount of data is, however, not subject to regulation. In some cases there are no structured evaluations relating to their quality and content. Nor is there an attempt to evolve a market discipline or practice relating to information standards.

This state of affairs should not, however, be disheartening. There are some who believe that the recently promulgated `Right to Information Act' would spur some organisations to work out information standards on their own. Whether this would necessarily be the case is uncertain. Organisations should on their own evolve information standards and meet them in order to improve their own functioning, credibility and accountability.

SETTING STANDARDS

One of the organisations in India that is an excellent candidate for meeting in quick time what could be regarded as the optimal information standards is the Reserve Bank of India. The RBI has in recent years made commendable progress in building an elaborate information infrastructure and in having a large and relatively easily accessible database.

Its historical data series cover a number of sectors — real, financial, fiscal, external and monetary — and are available on annual basis and in some cases, on quarterly, monthly and even daily.

In addition, the statutory reports — the Annual Report and the Report on Trend and Progress of Banking in India — contain information that supplement the data published in the regular statistical publications. Also valuable to number crunchers are the RBI's monthly Bulletin and the Weekly Statistical Supplement.

The pertinent question is whether the published data meet optimal information standards. To know the answer, it is necessary to know what information standards stand for. It is not important to define the standards; it is not enough if they are described. For example, the standards include clear enunciation of the statistical concepts or terminologies employed while furnishing information and how the concepts/terminologies are concretely transformed into verifiable quantities, where relevant. Where the statistical concepts/terminologies are not internationally consistent — that is, where the Indian usage of the concept/terminology differs from the usage elsewhere in the world — then some explanation or rationale of the Indian usage needs to be provided.

CODES AND CLASSIFICATIONS

Information standards are also concerned with classifications and codes, the statistical units, the extent of coverage and methods of measurement of economic phenomena. One would also like to know as part of the information standards, the reasons behind the inclusion or omission of certain items in the schedules canvassed as part of surveys.

Again, the compilation of aggregates from different sources for purposes of dissemination needs to be tested for fair coverage and reliability.

The RBI offers explanations to the tables that are published in almost all its publications. Such explanations are useful and perhaps necessary but they may not always be sufficient, at least in some cases. It is time one publication provided a detailed account of the concepts and terminologies used in the publications and also dealt with other elements of information standards as mentioned above.

Central bank watchers would be interested in knowing as to what extent its decision making is based on sound information base, in particular the data about transactions/operations. To enable one to make a judgment about the rationale of the decisions, it would be useful if, for example, specialised information from bank or NBFC supervision data and details of bids at the auctions of government securities participant wise are made available.

Such information would also give insights into the central bank's behaviour at any point in time not to speak of its inherent capacity or ability to live up to the tasks required to be undertaken in the specialised activities.

`PRIVATE' INFORMATION

An altogether different take voiced by some policy makers is that provision of detailed transactions/operations information would bring about volatility or uncertainty in the markets. It is also said that central banks should not part with some information, and treat them as `private', so as to be able to spring policy surprises if circumstances so warrant. Both these arguments sound reasonable but they should not come in the way of central banks providing data of the past (say, over the last five years) for better understanding of the policy path.

Central banks in emerging economies would also have to periodically examine whether the information needs of the day are met. There is, for example, considerable interest among observers of the Indian financial scene in having more information relating to the payments area, derivatives, the nature and sources of foreign capital inflows from major countries, and the costs of financial services, to name a few.

The RBI's Monthly Bulletin could carry special tables, may be once a quarter, on these areas as also on some of the specialised activities such as macro-prudential information and prudential information in respect of well defined groups, emanating from the data base of supervision departments.

Consideration of financial stability and other major objectives of economic development would stress the need for all organisations and government to evolve and deploy information standards.

The Central Statistical Organisation (CSO) is another set-up that plays a critical role in information dissemination, in particular of national income and investment.

No organisation or government department would, however, admit that its information collection is of doubtful content and quality. Yet the perception is that the CSO does not release the national income data without Ministerial approval since the days of P. C. Mahalanobis.

This perception should be corrected. One has to also examine the need for some institutional mechanism to check and cross-check the veracity of the information that is exchanged among the supervisors and regulators in the financial sector. Whether such an institutional mechanism would be best served by coordination committees or by some super institution to oversee and act on all the functional areas is a question that needs to be carefully examined.

HUMAN RESOURCE, THE KEY

Human resource is vital for observance of information standards. There are no in-house training programmes in this area. It is, therefore, necessary to outsource.

Information standards would suffer if integrity and work ethics among the persons in data gathering agencies are compromised. With this purpose in view, organisations may have to identify persons experienced in the areas of statistics and economics and with skills to communicate and coordinate with other organisations gathering information to ensure that the data are properly tested for content and quality.

These persons would also ensure that the systems and procedures of organisations are so structured that scrutiny and checking for internal consistency are undertaken at different levels along with accountability for non-compliance.

Each organisation should certify that its standards are complied with. This would foster reputation, improve market expectations process and help predict market behaviour better, thereby giving policy-making a keen edge.

(The author, a former Executive Director of the Reserve Bank of India, can be contacted at asurivasudevan @hotmail.com)

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