The Reserve Bank of India is clear that it wants to bring the consumer price index- based (CPI) inflation to 4% on a sustainable basis. While stating that the RBI seems confident of achieving this goal, Shamika Ravi, member, Prime Minister’s Economic Advisory Council, however, noted that some aspects of food inflation are not necessarily bad, given that these entail transfer to producers In an interview to Priyansh Verma, the noted economist also highlighted the credibility loss being faced by global rating agencies, and opined that their parameters to assess the subject entities including sovereigns are biased in certain way.
In a recent article, you had mentioned that socioeconomic surveys in India have tended to have a “rural bias”. Could you elaborate on this?
The idea around data science is that it needs to be agile and keep up with the actual changes in the economy. Given the last census (that took place in 2011), we need to keep updating the basic framework when we do large surveys. As surveys give one an estimate of something which is not representative of the real country, there is a problem. Our surveys are based on a framework that’s 12-year-old. The real economy of India is racing ahead and we are not able to capture (some of) this though data. And what we are able to capture is therefore leading to a lag in governance and administrative structures, and our policies this become dated.
What is the solution to this?
Since the census is a decadal exercise, the least one can do is to change the framework for conducting surveys. The framework should be based on the population projections, which are done every time the census is conducted. The sampling methodology for the surveys should look at the population projections, not the census. The projections have a lesser bias as they take into the account the past rate of urbanisation. The urban rate is not linear.
There is also a lag in releasing key surveys, such as PLFS…
We need the (PLFS) reports to come out sooner. There is an issue of representation & the response rate as well. We have found that rich people don’t want to participate i surveys. This leads to bias. Data quality needs to improve. We’ve a lot of data, but need to improve quality. You recently criticised Moody’s Investor Service comment on Manipur.
Do you feel that global rating agencies, such as Moody’s, Fitch, and S&P need to change the way they assess India’s macroeconomic fundamentals and government finances?
I believe the methodology that they use for assessment should not be so opaque. One needs to know how the ratings are making assessments of India’s macroeconomic fundamentals, the weightage they assign to different parameters such as, say, the Manipur incident. In many surveys that rating agencies put out, there is apparently a considerable amount of subjectivity. And that subjectivity is biased in a certain way. These agencies are going through a credibility crisis globally.
If I were into capital markets, I would have looked at the rating that these agencies give & the actual flow of money.
How do you see the impact of the ongoing Israel-Hamas on India’s economy?
Rising energy prices are obviously going to impact India. We are concerned with rising prices, whether it’s in account of the Russia-Ukraine war or the Israel-Gaza war. Anything that affects my growth rate quarter to quarter is a problem. The global economy is quite tumultuous. We are a $2,300 per capita income economy. Our growth is non-negotiable. So far, we have been able to manage our growth.