Statistics refers to the aggregates or averages that relate to certain inquiries or relationships. The meaning of statistics can be understood in two ways: in the plural sense and in the singular sense.

Meaning of Statistics

Statistics In the plural sense

In the plural sense, statistics refers to the systematic collection of numerical facts. It indicates information in terms of numbers or numerical data such as employment statistics and population statistics.

Aggregate of facts: Statistics is an aggregate of numerical facts and figures. A single value does not represent statistics. For example, “marks of student A is 40” is not statistics. It is simply information. However, “marks of students A, B, and C are 40, 45 and 42 respectively” can be termed as statistics.

Expressed numerically: Statistics expresses qualitative variables in numerical terms. For example, “poverty has declined” is not a statistical statement. However, poverty has declined by 2% during 1995-96” can be termed as a statistical statement.

Collected in a systematic manner: Statistical data is collected in a systematic and planned manner. Data collected without any order or system is unreliable.

Affected by a multitude of causes: Statistical data is affected by a multitude of causes. For example, the data on the demand for a commodity is affected by a number of factors such as price, incomes of consumers, tastes, and preferences.

Collected for a purpose: Statistical data is always collected with a purpose. Data collected without any purpose is useless. For example, for a study of crop production in the country, the region from where and the crops for which data needs to be collected must be pre-decided.

Must facilitate comparison: The collected data must be able to facilitate comparison on various grounds such as time and region.

Maintains a fair degree of accuracy in estimation: Often, estimations (approximations) are made in case of large and voluminous data. However, such estimations must have a fair degree of accuracy.

Statistics in the singular sense

In the singular sense, statistics refers to the science of studying statistical methods. It indicates the techniques or methods of collecting, organizing, presenting, analyzing, and interpreting data.

Collection of data: It is the first step in any research or study. Thus, utmost care must be taken during the collection of data. Data can be collected by the investigator herself or from reliable sources such as published and unpublished data.

Organizing of data: The collected data must be organized properly by editing, classifying, and tabulating the same.

Presentation of data: The organized data cannot be used for analysis unless it is presented in a proper and systematic manner. Data can be presented in the form of tables, graphs, charts, diagrams, etc.

Analysis of data: Various tools and methods can be used for data analysis. Examples include averages, dispersion, correlation, and regression.

Interpretation of data: The last step in any research or study is data interpretation. A study is complete only when proper and meaningful conclusions or inferences are drawn from the data.

Functions of Statistics

The following are some of the important functions of statistics.

Presents data in a simplified form: With the help of statistical tools, large and complex data can be presented in a simple and understandable form. For example, consider data on the incomes of various families in a region. In itself, it is difficult to understand and interpret, but it becomes comprehensible when presented in the form of averages or some such measure

Gives a definite form to the facts: Statistics allows the conclusions of research or study to be presented in numerical form. This gives the conclusions a definite quality.

Facilitates comparison: Data can be easily compared using statistical tools such as averages, percentages, and ratios. Comparison of data helps us in drawing important economic conclusions. For instance, a comparison of the average incomes in rural areas and in urban areas helps us in drawing conclusions relating to regional inequality in income.

Guides in the formulation of theories and policies: Policies on various economic matters such as wages and prices are formed on the basis of statistical data. Statistics forms the basis for the formulation and testing of theories. For example, policies for improvement in agricultural production can be formed with the help of statistical data relating to the production of various crops in different regions.

Helps in forecasting: Statistical techniques help in forecasting and predicting the future behavior of various variables such as market situations.

Scope of Statistics

Statistical tools and methods have wide applicability across various fields. The following are the broad areas where statistics is applied.

Statistics and business: Business firms use statistics to study market fluctuations and various other relationships such as those between the price of a product and the demand for the same. Statistical methods are used to carry out market surveys on various matters. Statistical tools like analysis and interpretation of data are used for managing a business on various grounds such as production, quality, and cost control.

Statistics and government: Statistics prove highly useful in the effective functioning of the state. Various policies and plans of the government are formed on the basis of statistical facts and figures. Plans and policies regarding matters such as poverty, unemployment, and population cannot be formed without the availability of suitable statistical data.

Statistics and natural sciences: Statistical techniques play a vital role in the study of natural sciences such as medicine, biology, and botany. For example, in medicine, the diagnosis of a disease depends on data such as pulse rate and blood pressure. Similarly, statistical tools are used to carry out research on the success or failure of a drug.

Statistics and research: Statistical data is a significant input to conduct various researches. Researchers undertake researches for studying different relationships between different variables; for example, price and demand, poverty and health, etc.

Statistics and other fields: Statistics is also applied in other fields such as banking, insurance, and trade. For example, the interest rate to be charged on loans is decided on the basis of a survey on the probability of repayment of loans.

Limitations of Statistics

Though widely used, statistics suffers from certain limitations. Some of these are given below.

Describes only quantitative aspects: Statistics studies only variables that can be expressed as numerical values. It fails to take into account qualitative variables such as beauty and loyalty.

Studies only aggregate: Statistics deals only with aggregates of quantitative variables. Individual values have no significance in statistics.

Results hold true only as averages: Statistical laws hold true only on an average basis or approximation. They are not exact. For example, if per capita income in India is Rs 33000, then it does not necessarily mean that each and every person in the country earns Rs 33000.

Can only be used by experts: Only a person having a comprehensive and sophisticated knowledge of statistics can handle statistical data efficiently. Such data cannot be properly interpreted by a layman.

Data can be misused and manipulated: Statistical data can be manipulated and misused as per the user’s discretion. Such manipulated data results in misleading conclusions.

Inapplicable to heterogeneous data: Statistical tools do not facilitate comparison in the case of heterogeneous data. Data has to be homogeneous in order to be compared. Despite the wide applicability of statistics, it should be noted that it is not a substitute for common sense. Numerical data should not be used without applying common sense. Statistical data should not be believed blindly as it can be misinterpreted or misused.

For instance, statistical data may be politically influenced or may involve personal bias. Moreover, statistical data and methods fail to reveal the errors committed by the investigator while surveying and collecting the data.

Interrelationship between Economics and Statistics

Assessing the performance of an economy: Statistics provides the basis for analyzing the performance of an economy and comparing it with other economies. For example, data on national income for different years can be used to assess the
economic performance of the concerned economy over a period of time. Similarly, variables such as savings, investments, the relative importance of different sectors to national income, and the contribution of each sector to national income can be assessed with the help of statistical data and facts.

Analyzing economic problems: The magnitude of economic problems such as unemployment, poverty, illiteracy, and population can be judged with the help of statistical data. It is only when the gravity of the problems is understood with the help of statistical data that suitable policies can be formulated to control and remove them.

Analyzing the relationship between economic variables: Relationship between two or more economic variables can be assessed with the help of statistical data. Such an assessment is helpful in establishing a cause and effect relationship and, thereby, in taking suitable corrective measures. For example, if with the help of statistical data it is established that a rise in prices aggravates poverty, appropriate measures can be taken to control rising prices.

The base for economic theories and models: No economic theory or model can be constructed without relevant statistical experiments. The various laws and theories of economics such as the law of demand and the law of supply are based on statistical data.

Formulation of policies: Statistics helps the government and the policymakers in formulating various policies for economic development. For example, if the government aims at encouraging the production level, then it formulates a policy based on the average production levels for the past few years. Similarly, policies on poverty and unemployment are based on relevant statistical data.

Facilitates research: Statistical data forms the base for research and studies. Various statistical tools and techniques are employed in research and studies such as analyzing the effect of one variable on another.

Forecasting: Economic forecasting such as price trends and market situations has statistics as the base. This helps in the formulation of future plans and policies.

Relation with the four basic aspects of economics: Statistics is closely related to the four basic aspects of economics namely, consumption, production, distribution, and exchange.

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Inflation is a sustained increase in the aggregate price levels. It refers to a state of rising prices and not a state of high prices. The types of inflation observed in an economy depend on the rate of increase in the price levels

Law of Demand

The law of demand states that other things remaining constant, the quantity of a good demanded increases with a fall in the price and diminishes when the price increases.