[Answered] Explain the role of reliable statistical data in effective economic policymaking. What could be the consequences of policymaking based on unreliable data?

The role of statistical data is very crucial for effective economic policymaking. Data-based policy-making makes vital use of data obtained from various sources and collaborates it with basic principles set out by the planners which helps policymakers fine-tune policies, adapt strategies, and improve overall economic performance.

How does reliable data help in effective policymaking?

• Transparency: Data collection and its utilisation helps in maintaining transparency between the citizens and the government. Citizens can view the outcomes based on data published in various periodicals, reports like Economic Survey.
• Targeted allocation: Reliable and timely data helps in targeted interventions where it is easy for planners to allocate a targeted amount which is best beneficial for the economy. Eg, COVID data on food insecurity and lack of employment, forced the government to allocate money to schemes offering food grains and employment allowance.
• Accountability: Statistical data helps in ensuring the accountability of public officials as data helps in comparing current data with historical trends & evaluating the performance of officials according to the desired outcome.
• Decision making: Policymaking based on reliable data is grounded on solid evidence rather than personal preferences. Statistical analysis helps analyse past trends and project future performance based on logical assumptions. It helps policymakers evaluate different policy options and choose the ones that are most likely to achieve desired outcomes.

Challenges of policymaking based on unreliable data:

• Irregularity in conducting surveys: Past few years there has been a shortfall in data collection owing to the pandemic and administrative difficulties. There is a delay even in important data like Census.
• Economic data: Important data related to the economy like monthly inflation & GDP data are not published periodically which creates uncertainty in the minds of consumers as well as corporates. It can lead to scepticism among investors, hamper economic growth, and deter both domestic and foreign investment.
• Legitimacy: Members of data collection agencies are selected based on political preference and to portray the ruling government in good light. This erodes the confidence of the public and creates a legitimation crisis.

Conclusion:

The urgent need is to strengthen the National Statistical Commission by ensuring that its members are picked from the committee of Parliamentarians and not the government. It is also essential to make NSC a statutory body as it was intended in 2006 to maintain its financial independence. There should be a policy of decentralisation of data with states building their databases for subjects in States List and the Centre can invest in capacity building and creating human and technical infrastructure.