Statistically Speaking....

Statistics is a fantastic subject that aids number of other fields. However, I am always uncomfortable with the interpretations based on statistics - let it be economy, politics or stock markets.

Many years back, I heard a story that goes like this:

A person wanted to cross a small river but he is not sure about it's depth. He wanted to speak to a knowledgeable person before making a decision since he does not know swimming. As a student approaches him, this person enquires with the student about the depth of the river. Having fresh in memory from his maths class, the student tells "average depth is Four and half feet". Since this person is more than five and half feet, he decides to cross the river by walking - until he was in trouble at half way, drowning.

The problem was peak depth of the river is more than 9 feet!

Today we read a lot about India's economy. One statistic that comes out always when some one is singing India song is "India's strong growth would be driven by it's huge pool of youth who are below the age of 30. No other country in the world got this advantage and hence it is great opportunity for India". Everybody claps.

In absolute numbers this translates lets say 300 million (about 30%). Then what about the rest 700 odd million? They are somewhere above 30 age. In 20-30 years India would have accumulated many millions into their 60's age bracket (Senior citizens). As India's population growth is slowing down the gravity will shift towards the other end. This is a problem with China - whose population is ageing quickly due to controlled birth rates.

The second statistic is Gross Domestic Product. GDP tells about the country. Today, India and China are racing ahead in the GDP tables. In coming decade or so, China would takeover USA as the most powerful economy - in GDP terms. What this statistic means to the citizens?

Let's see the equation or definition:

GDP = Country's economy as produced by manufacturing + Services and so on

When GDP is growing it means that country is doing well. That means, theoretically, citizens are doing well with their wages and earnings. But how well they are doing in real terms is the question to find answer.

That is why some people talk about another statistic called, Per capita income (PCI).

PCI equation is very complex to manage for politicians and economists. Your GDP increase does not mean that PCI is growing. At the same GDP, your PCI may increase if the population is reducing. PCI is good indicator only if the wealth is equally distributed. Unfortunately, in most of the countries 80% of wealth is held by 20% individuals. Hence PCI does not tell the truth. Then we have poverty line and so on...

If USA is No1 in GDP terms, which is the No1 country in PCI terms? Luxembourg - a small tiny country in Europe. But it's GDP is somewhere down in top 100!

So,- Statistics tell the facts but not the truth

Let's be careful while crossing the rivers to the top of the league tables - you may get drowned by statistics!