How satellite night lights and Google searches can help estimate state economic growth

Why researchers use alternative data

State-level economic statistics can arrive with a delay and may later be revised. Satellite images provide repeated observations of night-time brightness, which can reflect electricity use, transport, construction and other activity. Search data can show changes in attention to goods, services or economic concerns.

The Economic Times reported on 24 October that a study in the Reserve Bank of India’s October Bulletin found that combining night-light data with Google search trends could reduce state-level growth forecast errors by up to 62% in the study’s setting. That is a reported research result, not a guarantee for every state or every forecast.

Limitations and responsible use

Night lights can miss activity in dimly lit places, be affected by cloud cover or temporary lighting, and saturate in very bright locations. Search data reflect who uses a search engine and what they look for; attention does not necessarily equal purchases or production.

The methods are best treated as supplements that are tested against conventional economic data. Forecast improvements depend on the model, sample period and target variable, so the 62% figure should be read in that context.

Editorial note

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