The great Indian data deficit

Displaying an easy contempt for statistics, Mark Twain complained of “lies, damned lies and statistics”. But he may have taken a different view had he lived in India. The problem most Indian investors, researchers and policymakers face today is that there are too many tall claims floating around, with hardly any data to disprove them.

Whether one is looking for proof of India’s economic recovery, the state of its stock market or on how the corporate sector is faring, one often comes up against a brick wall. Often the relevant data is not available. If it is, its integrity is questionable because of quaint and archaic methods of collection. Or the data has been painstakingly compiled by the Central Statistical Organisation (CSO) and is safely concealed in a blurry PDF file on an obscure location, where no one is aware of its existence.

Consider the Indian stock exchanges, which are completely electronic, handle data feeds from over 6,000 listed companies, and is one of the most technologically advanced trading systems in the world. They probably generate many gigabytes of data on a real-time basis, on everything from blips in shareholding patterns to retail investor behaviour. But if you’re interested in researching the Indian equity market, be prepared to be very very patient.

Want to know the compounded annual return delivered by the Nifty index for the last 20 years? It may take half-an-hour to get at it. Though the NSE website does allow you to access historical index values, for some strange reason you can only do this for 365 days at a time. That’s 20 iterations before you can compile a 20-year record.

But the NSE is still one of the more transparent market institutions in disseminating data. At least it lets you access historical data on index values, total returns, price earnings multiples (PE) and dividend yields.

Its rival BSE isn’t so kind. We keep hearing that Indian stocks are not expensive because the Sensex PE hasn’t soared much above its historical average. If you want to check this out for yourself, tough luck. Historical data on the PE of India’s most watched bellwether — the S&P BSE Sensex — isn’t publicly disclosed. The data used to be available but has now mysteriously vanished from the website.

Want to find out how the stocks or sectors in the Sensex or Nifty have changed over the last 10 years? No way to get at it, except by trawling through dozens of press releases and back-working it. The truth is that all this data and much more is available, as a subscription service, to brokerages, research analysts, data aggregators and the media; anyone, in fact, who can afford to pay the exchanges or rent a Bloomberg terminal. But it isn’t available free of cost to the lay investor.

When listed companies skimp on public disclosures and share material information with a cosy coterie of analysts, it is deemed a market offence. But if basic data essential to making the equity allocation decision — on index performance, valuation or composition — isn’t accessible to the retail investor, doesn’t that smack of information asymmetry?

We’ve been told quite often in the last one year that the Indian economy is on the mend, with green shoots proliferating everywhere. But ask experts for statistical evidence of this and they hem and haw and usually talk of the Sensex, foreign investment flows, business confidence and other ephemeral indicators.

The truth is that, unlike the US economy which can be tracked minutely through official data on new jobs, capital investments, new home purchases and retail sales, those interested in India have very few data points to rely on.

Therefore, the only hard evidence we have of a domestic economic recovery is the GDP growth estimate for the July-September 2014 quarter, which came in at 5.3 per cent. This number was an improvement over the nadir of 4.7 per cent we hit last year, but lower than 5.7 per cent for the preceding quarter.

Turn to the monthly Index of Industrial Production (IIP) and thanks to its wild lurches from month-to-month, you would be hard-pressed to find a conclusive trend. In the latest release, IIP growth jumped from a negative 4.19 per cent in October to a 3.8 per cent expansion in November 2014. But as IIP growth has averaged 1.5 per cent in the first 11 months of 2014, this is hardly proof of industrial activity in high gear.

Though the IIP is the most comprehensive domestic indicator of economic activity, the index is beset with data collection problems. It compiles factory-level data from 22 different manufacturing sectors (it doesn’t measure services or agricultural activity). As it turns out, some of these sectors don’t report their data to their respective ministries as often as they should. With data points often going missing, the index ends up using older data or past averages each month, resulting in dips and spikes.

The widely tracked consumer and wholesale price indices are subject to similar issues too. Amid all the turmoil in the global commodity markets, can you believe that the monthly WPI for coal, bauxite and limestone hasn’t budged throughout 2014?

Apart from ironing out such issues, there is no doubt that India also needs to move beyond the GDP, IIP and core sector indices to disseminate other macro indicators. The data gap between India and other large nations on macroeconomic indicators, is becoming quite difficult to ignore.

While the US is undoubtedly the most prodigious generator of macro data, Eurozone nations disclose monthly retail sales, construction activity and unemployment data. Even China has shed its earlier Iron Curtain-esque policies to release reams of economic data in recent times. These range from monthly numbers on industrial value-added and capital investments, to detailed breakdowns of its real estate sector (square feet of space constructed and sold), down to the number of letters handled by its post offices.

To be sure, it may take considerable time for India, with its democratic set-up, to compile all this data. But it can make a start on employment trends, construction activity and retail sales.

But given India’s large unorganised sector and the practical difficulties this poses in data collection, is a bunch of statistics really worth all this trouble? After all, we have managed to attract record foreign capital even with our dodgy data. The problem with this is that, in the absence of official effort, the job of data collection and dissemination across most sectors tends to be taken over by private consulting firms, industry associations and market research outfits.

These players have no clear incentive to share objective data with the public. What is worse, they also have vested interests in the sectors they operate in. Maybe that’s why you never come across a consultant’s report that predicts a downturn in Indian real estate. Or research that talks about the dismal state of rural consumption.?

As this PR-savvy government surely knows, information is power and it certainly doesn’t pay to let others distort public perception to their own end. So, forget Mark Twain. The aam aadmi could surely do with more statistics.

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