Practical analysis for investment professionals
22 January 2014

The Challenges of Researching India

Posted In: Drivers of Value

Editor’s note: We asked Hadley to undertake some research into India in preparation for a report we ran a few weeks ago. It was a tough assignment, and she confronted many of the same issues that any research analyst might in trying to understand how things work on the other side of the world. This article shares her experience researching it and some of the difficulties that she encountered.

I’m embarrassed to say that the first thing I did when tasked with preparing research on India was visit Wikipedia. In case you were wondering, the India page has about three hundred citations and probably three times as many references.

Researching India is hard not because the information doesn’t exist. Maybe you don’t realize it until it becomes essential, but media converge of even the most minor global events is staggeringly detailed.

For example, take the dark cloud of inflation that has settled over the Indian economy. In October, inflation hit a high of 7%, two months earlier than the December forecasts of the very same figure. But that number doesn’t tell the whole story: food prices alone have ranged between 13 and 20%. Year-to-date, onion prices have skyrocketed by 278% while tomato prices are also up 122%. Still, kerosene is underpriced to discourage the use of wood for burning; however, because of the price differentials, it is more often smuggled out of the country.

Perhaps the biggest driver of inflationary trends in India, soaring food prices have also historically sparked social unrest, a phenomenon we saw globally in 2007-08. 60% of Indian farmland is not irrigated, making millions of farmers dependent on the monsoon season during which 80% of precipitation occurs. Might we witness similar reactions in India sometime soon?

You can lose yourself in charts and graphs documenting soaring grain prices and spend hours watching representatives from the Reserve Bank of India comment on every minute movement of the rupee-dollar exchange rate. You can read bond sale policy briefings until your eye glaze over and immerse yourself in live news updates via government agencies’ twitter accounts. There’s no dearth of information. In fact, sometimes the challenge is weeding out the facts from mountains of data and extrapolating larger trends from individual facts.

Researching India is hard not because the data is not reported. While, at least my, misconception of developing nations was that they lack the standard government agencies to collect such statistics, perhaps the bigger challenge in doing research was whether the reported numbers were trustworthy. It is no secret that the Indian government is believed to be corrupt. I checked, and there is a separate Wikipedia page for ‘Corruption in India.’ In fact, in 2012, India was ranked 94th of 176 countries by Transparency International’s Corruptions Perceptions Index.

So, sure, the unemployment rate might be measured and a percentage offered, but you have to take two steps back and think about it. India is a nation of approximately 1.27 billion people. Is it even possible to measure unemployment of so large a population? That seems like an intrinsically difficult task in and of itself. Is the government capable of this? What actually counts as employment, and who determines this? Is the statistic you are presented with accurate or idealized? Is that because of data errors, sampling errors, or manipulation? These questions compelled us to take everything we got with a gain of salt.

Finally, researching India is hard not because there’s no one to talk to about it. When we began contacting those whom we interviewed in our report, we were met with an overwhelming enthusiasm. We found ourselves chasing down many wildly different leads and wandering off on many obscure tangents.

It was truly amazing how excited people got when we presented our pitch. Still, what I actually found to be one of the biggest challenges was putting the facts I had into a coherent picture I could visualize. What is India?

I continue to feel unsatisfied with my research. It seems impossible to describe the way life is changing for Indians in villages all around the subcontinent when I can barely wrap my mind around where they live and work, what they eat and drink, and what languages they speak.

Averages don’t work. There is no average Indian home. How can there be? It is a nation of a 103 billionaires, a nascent middle class propelled into existence by a decade of rapid economic growth, and still millions who live well below the poverty line. In light of such basic inequality and statistical disparity, how could you calculate something as simple as average income and claim it representative of the true populace?

Living conditions should be understood as a spectrum. One third of the Indian population lives below the poverty line. One out of every six Indians lives in an urban slum, but the vast majority live in the countryside. The Indian village is the backbone of society and culture, yet the caste system continues to define social hierarchies although the “untouchable” discrimination was banned in 1947. At least for me, these social dynamics were inconceivable.

Until it is spelled out for you, you might not give much thought to culture. When you focus on it, researching culture was perhaps one of the most challenging areas I looked at. For example, food and drink play a major part in shaping Indian culture, which makes the rise in food prices all the more serious. Many Indians are vegetarians for religious reasons, and Jains do not consume any root vegetables either. More and more Christians and Muslims are meat eaters; the most common non-vegetarian dishes comprise chicken, fish, lamb or mutton. Of course, diet varies with socioeconomic status. Bread and rice are staple foods aversely affected by inflationary expectations, causing the burden of inflation to fall disproportionally on the poor.

Language also varies. Hindi is the official language of India, while English is the second. But, according to Census of India of 2001, 30 languages are spoken by more than a million native speakers, 122 by more than 10,000. Likewise, Hindi is the popular religion of most Indians with growing factions of Islam, Christianity, and Sikhism. How do people with limited access to education communicate without common language?

Ultimately, we ask questions we cannot fully answer on purpose to start conversations. We believe there is much untapped value in India and the first step to getting it is beginning a dialogue. India is a uniquely beautiful spectrum of development, culture, and progress, and the goal was to put some of that in perspective.

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Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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About the Author(s)
Hadley Chu

Hadley Chu is the Investor Education intern at CFA Institute. She is pursuing a Bachelor's degree in economics at Princeton University.

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