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

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

When Pakistanis whispered: ‘end military rule’ — A Moscow memoir

During the recent anti-terror operation inside Pakistan by the Government of India, called Operation Sindoor — a name some feminists consider patently patriarchal, even though it’s officially described as a tribute to the wives of the 26 husbands killed in the terrorist strike — I was reminded of my Moscow stint, which lasted for seven long years, from 1986 to 1993.

Ahmedabad's civic chaos: Drainage woes, waterlogging, and the illusion of Olympic dreams

In response to my blog on overflowing gutter lines at several spots in Ahmedabad's Vejalpur, a heavily populated area, a close acquaintance informed me that it's not just the middle-class housing societies that are affected by the nuisance. Preeti Das, who lives in a posh locality in what is fashionably called the SoBo area, tells me, "Things are worse in our society, Applewood."

Tracking a lost link: Soviet-era legacy of Gujarati translator Atul Sawani

The other day, I received a message from a well-known activist, Raju Dipti, who runs an NGO called Jeevan Teerth in Koba village, near Gujarat’s capital, Gandhinagar. He was seeking the contact information of Atul Sawani, a translator of Russian books—mainly political and economic—into Gujarati for Progress Publishers during the Soviet era. He wanted to collect and hand over scanned soft copies, or if possible, hard copies, of Soviet books translated into Gujarati to Arvind Gupta, who currently lives in Pune and is undertaking the herculean task of collecting and making public soft copies of Soviet books that are no longer available in the market, both in English and Indian languages.

RP Gupta a scapegoat to help Govt of India manage fallout of Adani case in US court?

RP Gupta, a retired 1987-batch IAS officer from the Gujarat cadre, has found himself at the center of a growing controversy. During my tenure as the Times of India correspondent in Gandhinagar (1997–2012), I often interacted with him. He struck me as a straightforward officer, though I never quite understood why he was never appointed to what are supposed to be top-tier departments like industries, energy and petrochemicals, finance, or revenue.

Environmental report raises alarm: Sabarmati one of four rivers with nonylphenol contamination

A new report by Toxics Link , an Indian environmental research and advocacy organisation based in New Delhi, in collaboration with the Environmental Defense Fund , a global non-profit headquartered in New York, has raised the alarm that Sabarmati is one of five rivers across India found to contain unacceptable levels of nonylphenol (NP), a chemical linked to "exposure to carcinogenic outcomes, including prostate cancer in men and breast cancer in women."

PharmEasy: The only online medical store which revises prices upwards after confirming the order

For senior citizens — especially those without a family support system — ordering medicines online can be a great relief. Shruti and I have been doing this for the last couple of years, and with considerable success. We upload a prescription, receive a verification call from a doctor, and within two or three days, the medicines are delivered to our doorstep.

A conman, a demolition man: How 'prominent' scribes are defending Pritish Nandy

How to defend Pritish Nandy? That’s the big question some of his so-called fans seem to ponder, especially amidst sharp criticism of his alleged insensitivity during his journalistic career. One such incident involved the theft and publication of the birth certificate of Masaba Gupta, daughter of actor Neena Gupta, in the Illustrated Weekly of India, which Nandy was editing at the time. He reportedly did this to uncover the identity of Masaba’s father.

Revisiting Gijubhai: Pioneer of child-centric education and the caste debate

It was Krishna Kumar, the well-known educationist, who I believe first introduced me to the name — Gijubhai Badheka (1885–1939). Hailing from Bhavnagar, known as the cultural capital of the Saurashtra region of Gujarat, Gijubhai, Kumar told me during my student days, made significant contributions to the field of pedagogy — something that hasn't received much attention from India's education mandarins. At that time, Kumar was my tutorial teacher at Kirorimal College, Delhi University.

A sector under siege? War and real estate: Navigating uncertainty in India's expanding market

I was a little surprised when I received an email alert from a top real estate consultant, Anarock Group , titled "Exploring War’s Effects on Indian Real Estate—When Conflict Meets Concrete," authored by its regional director and head of research, Dr. Prashant Thakur. I had thought that the business would wholeheartedly support what is considered a strong response to the dastardly terrorist attack in Pahalgam, Operation Sindoor.

Search This Blog