Economics and statistics go hand in hand. In other words, one cannot do economic study without making use of statistics. The importance of statistical information in economics is discussed below.

1. Statistical information supports or confirms a principle:

• While performing an economic study, the approach can be divided in two parts. They are:
  1. The philosophy of economics: The philosophy of economics observes human behavior.
  2. Scientific tools of economics: These tools are used to establish principles and theories.
• One cannot directly believe the established theories and put them in practice.
• We need to test the validity of such theories in real life at different times and places. To do so we need to gather information related to the established theory from real life activity at such different times and places. Such information can be collected and presented in quantitative terms with the ‘ help of statistical tools.

Example:
(a) Based on the economic studies, a theory has been established between the cause and effect of rainfall and agriculture.

By collecting and analyzing statistical data on rainfall and agricultural production in a region at one time or at different times one can understand the cause-effect relationship theory established.

(b) Similarly, statistical data on price of a commodity and its demand can help to confirm the theoretical relationship established by economics between the two.

2. Statistical information gives an idea about the changing trends of economic parameters:

With the help of statistical data obtained under economic study, we can obtain an idea of the direction and magnitude of change in economic- parameters.

Example:

• We can know how sales revenue of a particular firm is changing
• We can know the trends of employment in a nation
• We can know the trends of production in different sectors of an economy
• For example, using economic study one may say that agricultural production is falling which is affecting national income or supply of money is rising in the economy.
• Such data help government to make proper economic policies. People may also take benefit of such data and policies and change their production patterns.

3. To make comparative study easy:

If appropriate statistical data are obtained then we can compare several parameters over different time periods, across regions and also across nations.

Example:

• We can compare growth rate of India’s national income between 1951 and 2015.
• We can also compare India’s macroeconomic parameters like per capita income, inflation etc. with those of other countries like USA, UK, China, etc.

4. To make precise presentation of facts:

• A picture is worth thousand words and this applies to economics too. At times facts about economic parameters can be represented more clearly with the help of statistical data and graphs. _
• Graphs showing inflation, agricultural production, regional disparities in incomes, etc. can give clearer picture of their trends as compared their written description.
• Such pictorial and graphical representations can be understood easily even by layman.