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Quantitative Techniques – I

Notes 3. Importance in national income accounting: The system of keeping the accounts of income
and expenditure of a country is known as national income accounting. These accounts
contain information on various macro-economic variables like national income,
expenditure, production, savings, investments, volume of exports and imports, etc. The
national income accounts of a country are very useful in having an idea about the broad
features of its economy or of a particular region. The preparation of these accounts require
data, regarding various variables, at the macro-level. Since such information is very difficult,
if not impossible, to obtain, is often estimated by using techniques and principles of
statistics.
4. Importance in planning: Planning is indispensable for achieving faster rate of growth
through the best use of a nation’s resources. It also requires a good deal of statistical data
on various aspects of the economy. One of the aims of planning could be to achieve a
specified rate of growth of the economy. Using statistical techniques, it is possible to
assess the amounts of various resources available in the economy and accordingly
determine whether the specified rate of growth is sustainable or not. The statistical analysis
of data regarding an economy may reveal certain areas which might require special
attention, e.g., a situation of growing unemployment or a situation of rising prices during
past few years. Statistical techniques and principles can also guide the Government in
adopting suitable policy measures to rectify such situations. In addition to this, these
techniques can be used to assess various policies of the Government in the past. Thus, it is
rather impossible to think of a situation where planning and evaluation of various policies
can be done without the use of statistical techniques. In view of this it is sometimes said
that, “Planning without statistics is a ship without rudder and compass”. Hence statistics
is an important tool for the quantification of various planning policies.
5. Importance in business: With the increase in size of business of a firm and with the
uncertainties of business because of cut throat competition, the need for statistical
information and statistical analysis of various business situations has increased
tremendously. Prior to this, when the size of business used to be smaller without much
complexities, a single person, usually owner or manager of the firm, used to take all
decisions regarding its business. For example, he used to decide, from where the necessary
raw materials and other factors of production were to be obtained, how much of output
will be produced, where it will be sold, etc. This type of decision-making was usually
based on experience and expectations of this single man and as such had no scientific basis.
The modern era is an era of mass production in which size and number of firms have increased
enormously. The increase in the number of firms has resulted into cut throat competition among
various firms and, consequently, the uncertainties in business have become greater than before.
Under such circumstances, it has become almost impossible for a single man to take decisions
regarding various aspects of a rather complex business. It is precisely this point from where the
role of statistics started in business. Now a days no business, large or small, public or private,
can prosper without the help of statistics. Statistics provides necessary techniques to a
businessman for the formulation of various policies with regard to his business. In fact the
process of collection and analysis of data becomes necessary right from the stage of launching a
particular business. Some of the stages of business where statistical analysis has become necessary
are briefly discussed below:

1. Decisions regarding business, its location and size: Before starting a business it is necessary
to know whether it will be worth while to undertake this. This involves a detailed analysis
of its costs and benefits which can be done by using techniques and principles of statistics.
Furthermore, statistics can also provide certain guidelines which may prove to be helpful
in deciding the possible location and size of the proposed business.

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