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Aerial view of a highway at night. Photo taken by Sid Verma.

Imtiaz ul Haq is a Financial Sector Consultant at the World Bank and a Research Affiliate at the Mittal Institute, formerly a Fellow at both the Mittal Institute and the Gui2de Initiative at Georgetown University. He holds a Ph.D. in Finance from the University of Manchester.

During his time at Harvard, ul Haq examined how mobile money can be used to build economic resilience against aggregate shocks, such as those arising from climate change or natural disasters. “The findings are particularly relevant for low-income individuals in developing countries,” he says. At the World Bank, he works on policy measures that aim to expand and deepen the financial services sector, leveraging disruptive technology to improve welfare and help individuals cope with economic uncertainty.

By Imtiaz ul Haq

From political rallying calls and primetime news to heated arguments in policy boardrooms, few economic indicators garner as much attention as the Gross Domestic Product (GDP). Even fewer have the distinction of being as difficult to capture, poorly understood, and easily manipulated. Yet the GDP and its growth rate continue to dictate investment, public sentiment, and government policies. Despite its centrality, measuring the true economic growth rate has not always been straightforward. This is especially true in South Asia, where several recent instances of economic growth have been misestimated.

Getting to the facts about economic growth is easier said than done for several reasons. Firstly, ruling political parties hold the power and motive to pressure officials into misreporting facts and figures in their favor, an example being the misreported GDP growth rate by the Pakistani government in 2016­–17. Such distortion is not easy to catch and even more difficult to correct. Secondly, the state may simply not possess the capacity to accurately measure performance to begin with, as is the case in Afghanistan.

Even for countries with a more advanced apparatus, measuring GDP at a local level (such as district or city) is too time-consuming and costly to undertake on a regular basis. Thirdly, official estimates can be biased, since they do not capture the informal sector — an oversight that can be problematic in a country with a thriving informal economy like Bangladesh. Fourthly, governments have some control over how they define, and consequently measure, GDP over time. This was reportedly done in India in 2011–12, leading to an overstated GDP growth rate in subsequent years.

For decades, economists have evaluated economic performance by digging through economic indicators and government reports that are subject to the above shortcomings. It may be time to turn to an unconventional tool: satellites in space. Satellite data captures light activity at night around the globe, and recent economic research shows that this can serve as a good proxy for economic activity since light usage tends to increase with income levels. This approach not only overcomes the aforementioned issues to capture a true, unbiased assessment of economic performance, but it does so at a highly local level over frequent intervals.

Satellite data can serve as a necessary verification of official measures of economic growth, especially when they appear questionable. Such was the case in Pakistan when the incumbent government was accused in 2017 of overestimating economic growth right before the country was heading into an election. The government’s claim of 5.3% growth in GDP was inconsistent with rising unemployment, decreasing exports, surging imports, falling remittances, and a drop in foreign exchange reserves. The fact that the incumbent government had been caught in the past misreporting economic data to the International Monetary Fund (IMF) only added to the suspicion.

A closer look at satellite data for 2013–2018 (the tenure of the then-incumbent government) reveals that, while light intensity throughout the country grew during the time, the growth translates into a national GDP growth rate of only 3.54% per year. This contrasts with the much higher official GDP growth rate of 4.77% reported by the government. Interestingly, the main competing political party ruled over a province that experienced a significantly higher economic growth rate of 4.01% average per year. Satellite data also confirms suspicions that the ruling party focused on the development of their political capital, Lahore, which grew 1.24% more every year, on average, than the rest of the province.

The fixation around GDP as an all-encompassing economic indicator is unlikely to die out anytime soon, making it even more imperative to fine-tune this tool as a measure of growth. Satellite data can serve this purpose well by supplementing and, when needed, challenging official estimates of economic growth released by the government. This is a rare resource that allows an impartial, more accurate measure of how different regions across the country perform and should serve as a vital input not only in the evaluation of financial matters, but also political ones. When it comes to the economy, the best way to size things up may be to look down.