Central banks need stronger communication in turbulent times: RBI governor

Even short-term forecasting has become a challenge due to pandemic, says Shaktikanta Das

Central banks must strengthen their communication about policy in "turbulent times" like the coronavirus pandemic and use alternative indicators and data sources, said Reserve Bank of India governor Shaktikanta Das on Wednesday.

“Central banks on their part are both producers and users of statistics for policy actions as well as for assessing the outcomes of their actions,” he said at the central bank’s Statistics Day Conference.

"They also need to establish stronger communication of their policies and actions in such turbulent times. Thus, central banks too had to cope with all these challenges by focussing on alternative indicators and data sources for monitoring the effects of the pandemic in all its dimensions.”

More than 95 per cent of National Statistical Offices (NSOs) had partially or completely stopped face-to-face data collection in May 2020, he said citing a survey by the United Nations and the World Bank.

April and May 2020 were the worst in terms of mobility as the country went into a lockdown in the last week to March 2020 to curb the spread Covid-19.

“The Ministry of Statistics and Programme Implementation was compelled to publish imputed figures for consumer price index (CPI) for two consecutive months during the first wave of the pandemic in 2020 due to immense difficulty in collection of prices for many items."

Das said Covid-19 had prompted statistical innovations, but the disruption the disease caused also posed challenges to build public trust in the resulting data.

“While new data sources open up opportunities for official statistics, it also raises issues for the discipline. Development of proper data quality framework and ensuring data privacy and data security has assumed top priority.”

Even short-term forecasting has become a challenge for central banks in the aftermath of the pandemic as large shifts in economic conditions cause breaks in statistical models. The assumptions underlying these models also keep changing during uncertain times.

“The experience of the last two years has made us mindful of the data gaps that remain, though ensuring standardisation of methodologies in the compilation of various national aggregates have stood us in good stead,” he said.

The governor said India requires regional dimensions of national indicators given its vastness and geographical diversity.

“We should aim at enhanced granularity, regularity, and better validation. In the Reserve Bank, we treat information as a ‘public good’,” he said, adding the RBI envisioned to keep calibrating information management systems to the needs and expectations of various stakeholders.

“We should also tap alternate data sources, and consider ways and means of fitting them in the existing analytical frameworks,” Das added.