Skip to main content

Noteban: Harvard, Goldman Sachs scholars bemoan lack of "authentic" growth data

By Rajiv Shah
In a sharp observation, scholars of a recent high-profile study, "Cash and the Economy: Evidence from India's Demonetization", whose results have been widely reported, have bemoaned: That there is lack of authentic official data on Gross Domestic Product (GDP) with the Government of India, forcing them to use “nightlights data”, a methodology usually adopted by top international scholars to assess socio-economic growth in highly underdeveloped countries of East Africa and parts of Asia, where no authentic ground level surveys are available to assess development.
Under this methodology, statisticians the world over use satellite images of earth’s nightlights to measure social and economic activity and provide data that can help determine socioeconomic indicators when no other reliable information exists where economic accounting systems are weak, or when satellite images are more frequently available than such data.
Says an Asia Development Bank (ADB) expert, Arturo Martinez, Jr, who has used this method, "The data are more than just satellite images of earth; researchers use these images to derive proxy measures of various official statistics. The presumption is that most social and economic activities at night require light; hence the intensity of nighttime lights and the area they cover should correlate with socioeconomic indicators and economic development."
Using this method as an important measure to assess demonetization (losely referred to as noteban), scholars with well-known institutes – Gabriel Chodorow-Reich (Harvard), Gita Gopinath (Harvard), Prachi Mishra (Goldman Sachs), and Abhinav Narayanan (Reserve Bank of India) – in their study on demonetisation, find that the nightlights-based estimates suggest a “contraction” of output due to demonetization of 2 percentage points “in 2016Q4.”
Insisting that “demonetization had an adverse effect on real economic activity”, the study, published as a National Bureau of Economic Research (NBER) Working Paper No 25370 (December 2018), says, the results show “economically sharp, statistically highly significant contractions in areas (districts) experiencing more severe demonetization shocks”, adding, “The effects on real economic activity peak in the period immediately following the announcement (November 8, 2016) and dissipate over the next few months as new currency arrives.”
The scholars observe “a decline in nightlights-based economic activity and of employment of 3 percentage points or more in November and December of 2016”, which translates into “a decline in the quarterly growth rate of 2 percentage points or more”.
Pointing towards the reason why they adopted the nightlight activity to “measure of real activity following demonetization”, the scholars say, “Nightlight intensity refers to low-light imaging data collected by satellite and filtered to measure the quantity of artificial (i.e. human-generated) light in an area. Such data have been used to augment official measures of output and output growth and to generate estimates for areas or periods where official data are unavailable.”
Noting that nightlights activity suggest that “demonetization reduced real economic activity”, the scholars say, the areas with “larger declines in currency experienced sharper declines in employment and in nightlight activity after demonetization occurred”. They add, “The magnitude of the effect on real activity is substantial.”
Answering the question as to why does the “decline” does not reflect in the “national GDP data”, the scholars say, “National data are volatile and subject to other shocks, making it difficult to discern a single break point around demonetization”, adding, “Our measures of real activity have the advantage over official GDP of directly incorporating informal sector activity.”
This is particularly important, say the scholars, as “the informal sector in India is estimated to account for 81% of total employment (ILO, 2018) and 44% of total output and is especially cash-intensive. While the level of official GDP includes an estimate of informal sector activity derived from a quinquennial household survey, quarterly changes in GDP do not reflect any direct measurement of informal sector activity.”
The scholars note, “Our results also point to the likelihood of an absolute decline in economic activity at the end of 2016 not captured in official statistics”, underlining, “While the cashless limit may appropriately describe economies with well developed financial markets, in modern India cash continues to serve an essential role in facilitating economic activity.”
The scholars conclude, “There may be longer term advantages from demonetization that arise from improvements in tax collections and in a shift to savings in financial instruments and non-cash payment mechanisms. Evaluating these long-term consequences requires waiting for more data and an empirical strategy suited to the study of longer term effects.”

Comments

TRENDING

Rushdie, Pamuk, 260 writers tell Modi: Aatish episode casts chill on public discourse

Counterview Desk
As many as 260 writers, journalists, artists, academics and activists across the world, including Salman Rushdie, British Indian novelist, Orhan Pamuk, Turkish novelist and recipient of the 2006 Nobel Prize in literature, and Margaret Atwood, Canadian poet and novelist, have called upon Prime Minister Narendra Modi to review the decision to strip British Indian writer Aatish Taseer of his overseas Indian citizenship.

Church in India 'seems to have lost' moral compass of unequivocal support to the poor

By Fr Cedric Prakash SJ*
In 2017, Pope Francis dedicated a special day, to be observed by the Universal Church, every year, as the ‘World Day of the Poor’. This year it will be observed on November 17 on the theme ‘The hope of the poor shall not perish for ever’; in a message for the day Pope Francis says:

There may have been Buddhist stupa at Babri site during Gupta period: Archeologist

By Rajiv Shah
A top-notch archeologist, Prof Supriya Varma, who served as an observer during the excavation of the Babri Masjid site in early 2000s along with another archeologist, Jaya Menon, has controversially stated that not only was there "no temple under the Babri Masjid”, if one goes “beyond” the 12th century to 4th to 6th century, i.e. the Gupta period, “there seems to be a Buddhist stupa.”

VHP doesn't represent all Hindus, Sunni Waqf Board all Muslims: NAPM on SC ruling

Counterview Desk
India's top civil rights network, National Alliance of People’s Movements (NAPM), even as describing the Supreme Court's Ayodhya judgement unjust, has said, it is an "assault on the secular fabric of the Constitution". In a statement signed by top social workers and activists, NAPM said, "The judgement conveys an impression to Muslims that, despite being equal citizens of the country, their rights are not equal before the law."

'First time' since 1970s poverty up 10%, consumer spending down 4%: GoI survey

By Our Representative
In what may prove to be a major embarrassment for the Government of India (GoI), a new official survey, carried out in 207-18, has reportedly said that average consumer spending in India fell by more than 4% the previous six years "primarily driven by slackening rural demand." The survey, "Key Indicators: Household Consumer Expenditure in India”, carried out by the National Statistical Office (NSO), says that money spent per person in a month fell by 3.7% from Rs 1,501 in 2011-12 to Rs 1,446 in 2017-18.

As fear 'grips' right liberals, Arvind Panagariya, too, would be declared anti-national?

By Rajiv Shah
It is surely well-known by now that India's top people in the power-that-be have been castigating all those who disagree with them as "anti-nationals". Nothing unusual. If till yesterday only "secular liberals", and "left-liberals" were declared anti-national, facts, however, appear to have begun surfacing that, now, guns are being trained against those who could be qualified as right liberals, too. Let me be specific.

National award winning film 'Hellaro' co-produced by three chartered accountants

By Our Representative
“Hellaro”, a Gujarati feature film produced by Saarthi Productions in association with Harfanmaula Films (Ahmedabad) was declared as the Best Feature Film at the National Film Awards which was conferred by the Government of India. The film also won the Special Jury Award for the Best Actress to all the 13 actresses of the film.
Ashish Patel produced the movie, which has been co-produced three co-producers, Aayush Patel, Prateek Gupta and Mit Jani, all of whom, interestingly, started their filmmaking journey after becoming Chartered Accountants in 2012.
“Hellaro” is directed by Abhishek Shah, who has been working in Gujarati theatre since the past 17 years as writer, director and actor and has received numerous awards for his plays. He has also worked as a casting director for 12 films.
“Hellaro” is a period drama based in Kutch and has been co-written by Abhishek Shah and Prateek Gupta. Gupta previously received the Best Debut Director Award, along with Mit Jan…