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RBI’s questionable cotton production statistics

M D Dewani

The Reserve Bank of India (RBI) continues to keep its eyes closed to the ground realities, while presenting its estimates of cotton crop for the 2004-05 season, as also for the earlier seasons.

For instance, RBI’s Annual Report for 2004-05 which was released on August 29, 2005 places the cotton crop estimate for the 2004-05 season at 178 lakh bales of 170 kg each, while actual arrivals of cotton, had already crossed 235 lakh bales by the end of July 2005. It would, therefore, be quite irrational to place the crop estimate for the year below the level of actual receipts. However, RBI does not seem to be much worried about this though this might affect credibility of such information.

Of course, the RBI has noted that it received this information from the ministry of agriculture, Government of India. It is, however, doubtful whether it can thus throw away its own responsibility to check up all such information coming to it, before incorporating the same in its annual report. Neither it could reasonably argue that such information was not available to it. Had it tried, it could have obtained the relevant information from the cotton ginning and pressing factories or from the state-owned Cotton Corporation of India (CCI). Most of the cotton crop passed through the ginning and pressing factories in the country. A fairly reliable indication of actual arrivals of cotton can be obtained at any point of time from them. Even private agencies like the East India Cotton Association (EICA) get such information from them and continue to revise their earlier estimates of cotton crop.

Secondly, almost from the very start of the 2004-05 season, CCI had started operating the price-support scheme to protect the interests of cotton growers in the country, against falling prices. Had RBI approached CCI, it could have been possible for it to get fairly reliable information about arrivals of cotton in the country. With the help of such information, the RBI could have revised the crop estimate available to it from the Union ministry. It would, however, appear that while preparing its annual report, the RBI ignored to do so. Not only the RBI’s estimate of cotton crop for 2004-05 is thus wide of the mark, but also its cotton production statistics for the earlier years remain questionable.

The RBI cannot be unaware of the fact that global organisations like the International Cotton Advisory Committee as well as the US Agriculture Department which keep a close eye on cotton production, movement and consumption through out the world, do not attach any importance to the cotton production statistics issued by the Union agriculture ministry. Considering all this, it is high time that the RBI re-orients its approach and bank on reliable sources.