By Ira Dugal
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Greetings from Mumbai!
India’s central bank is reviewing its economic forecasting tools, and trade authorities have had to restate gold import data for the first nine months of the financial year. Is India doing enough to improve the quality of its economic statistics? That’s the focus of our analysis this week.
And Heineken-owned United Breweries has been forced to stop beer sales in a key Indian state as a price dispute rages. Scroll down for more on that.
This week in asia
** China, India seek new supplies as US sanctions tighten grip on Russian oil
** BOJ deputy governor flags chance of rate hike next week
** Trial of South Korea’s impeached President Yoon set to begin
** TSMC fourth-quarter profit seen jumping 58% on strong AI chip demand
Economic data as Achilles heel
India’s new central bank governor, Sanjay Malhotra, has wasted no time establishing his data-driven bona fides: Barely a month into the job, he has initiated a broad-based review of the bank’s forecasting tools, Reuters colleagues Siddhi Nayak and Swati Bhat reported.
He had good reason to move quickly.
The Reserve Bank of India’s GDP growth forecasts have fallen wide of the mark in 10 of the last 13 quarters, while its inflation forecasts have been off by more than 50 basis points in nine of them.
Such misses in forecasting can carry a huge cost, potentially inducing policy errors and leading investors astray.
In the current financial year, for instance, the RBI’s previous estimate of strong 7.2% growth encouraged it to forgo cutting interest rates. But after that estimate was slashed to 6.6% last month, a rate cut is now looking likely at its next policy meeting in February.
And it’s not just the central bank whose numbers aren’t adding up.
India was forced to revise its gold import data for April-November 2024 by a massive $11.7 billion last week after a miscalculation. The overall trade deficit is still to be restated and questions about accuracy now hang over numbers for other commodities. Any major revisions could affect the currency and commodities markets.
India’s official economic statistics have, over the years, been severely impeded in part by inadequate data on the country’s large informal sector, as well as periods of political interference and the lack of an independent data authority.
In the last year or so, though, there has been a flurry of activity to improve outdated calculations of inflation and GDP data, while releasing data at more frequent intervals to help analysts better gauge economic conditions. Those changes will steadily be making their way into data releases over the next 12-18 months.
“High quality and frequent macroeconomic data is essential for markets to continually measure and understand an economy,” Krishna Bhimavarapu, economist at State Street Global Advisors wrote in April last year.
India ranks only 92nd out of 156 nations in terms of GDP data quality, according to World Economics, a data analytics firm, whose “C” quality rating for India indicates that its GDP data should be used with caution.
That lags even China, where doubts have frequently been raised over the quality of economic data. Chinese authorities last year amended the statistics law to combat data fraud.
An upcoming refresh
Several data-related initiatives have also been put in motion by Ministry of Statistics and Planning Secretary Saurabh Garg, who was appointed to his leadership post in May 2024.
The ministry within the next few months plans to launch monthly data on urban and rural labour markets, previously covered in quarterly or annual surveys, and an annual corporate survey that includes capital expenditure plans.
It has also begun regularly seeking views from corporations and private sector economists about data shortcomings, with Garg personally helming many of those meetings.
Another key initiative is an update of the basket of goods used to calculate retail inflation, while the base years for inflation and GDP are also under review with new series due for roll-out by the first quarter of 2026, the ministry has said.
“These are the precise steps that global investors look forward to.” State Street Global Advisors’ Bhimavarapu said.
“The monthly labour market data will especially be of interest and, needless to say, these are positive steps in the right direction.”
What steps would help India improve economic data quality? Write to me with your views at ira.dugal@thomsonreuters.com.
Quote of the week
“Despite our continuous efforts over the past two years, there has been no increase in the base prices offered for our products. This has resulted in escalating losses, making our operations in the state unviable.”
Heineken-owned United Breweries went public last week with a dispute over beer prices, explaining in a press release why it had stopped beer sales in the state of Telangana, home to the tech boomtown Hyderabad and India’s biggest beer-consuming state.
A state official said the 33% price hike demanded by the company would burden consumers.
The south Indian state has proved to be a challenging place to do business for global alcohol companies, which are demanding unpaid dues of about $466 million from the Telangana government.
Market matters
The share price of India’s oldest stock exchange, BSE Ltd, has doubled over the past year after a record volume of IPOs, which are expected to have boosted revenues.
The IPO boom will continue unabated in 2025, BSE CEO Sundararaman Ramamurthy said in an interview, citing applications worth nearly 1 trillion rupees in the pipeline.
(By Ira Dugal; Editing by Edmund Klamann)
