Indian
government sharply lowered the industrial growth, which is measured monthly
with a gap of one to two months through the Index of Industrial Production
(IIP) for January, 2012 from 6.8% to 1.1% citing "incorrect
reporting" and Mr. Pranab Mukherjee, Finance Minister had also ordered a
probe into the reasons behind the misreporting.
Central
Statistical Office (CSO), Ministry of Statistics and Programme Implementation (MOSPI)
is India's apex statistical body and is responsible in compiling the IIP and
also producing the more robust results concerning Indian industrial growth and
other details through a comprehensive annual survey conducted by the help of
National Sample Survey Office, MOSPI. IIP
is meant to be a short-term indicator of industrial activity, while ASI is a
comprehensive survey of registered manufacturing units in the country. The ASI
data comes with a lag of two to three years as it covers a large number of
units across the country. Growth in
industrial production, measured by IIP and ASI, has consistently shown
significant divergence. Manufacturing in IIP grew by 4.8% in 2009-10, while
growth in gross value added under ASI was at 10%. But there is a lot of time gap between the
ASI data with its reference year. This is the reason of having quick estimates
of the growth in industrial production by help of IIP. There had been many comments in the past on
the results of IIP. Many, even within
the Ministry of Statistics & PI, have raised questions on the quality of
ASI data too. A few economists say a
comparison between the IIP and ASI is not possible because of the varying
nature of the data. However, they say there should not be such wide variations
in the data. Senior statisticians within
the government say there is no systematic relationship between the ASI and IIP
growth rates. The quantum of divergence between the two series does not follow
any pattern and therefore emphasize on the need to base IIP on the superior ASI
data. The latest ASI data is available
for the year 2009-10.
The
CSO had earlier carried out studies comparing growth rates under IIP and ASI by
using the value of output rather than the quantity, but it has been
unsuccessful in reconciling the divergence.
Currently,
the government tries to revise the base year of IIP every five years in tandem
with the revision of the GDP base. The CSO had introduced a new series of IIP
with a revised base of 2004-05 only a year ago.
And is now planning to change the structure of the Index of Industrial
Production (IIP) more frequently to remove the rising doubts on its accuracy. CSO has recommended now that the basket and
base year of IIP be upgraded at regular intervals to address volatility in the
data. It has also suggested making the Annual Survey of Industries the basis
for revision of the IIP base year.
The
CSO recommendation would comply with international standards set by the United
Nations Statistics Divisions, which prescribes changing the weighting diagram
of industrial statistics every year and the product basket later when more data
is available.
But the main problem lies somewhere else and
that should be addressed first. Without
that the problem will remain. The main problem is
that the data received every month is never complete. Most of the marked and identified
manufacturers don’t adhere to the time schedule and many other divergences are
being noted. Many a times the quantities
produced by these manufacturers are being repeated month after another without proper
scrutiny and other relevant considerations.
Some months the data gaps are huge, which leads to the anomalies mentioned. Problems are also in ASI data too, but of
different nature. The production figures
are normally matched with that of financial data provided to other wing of the
Government. It is a big problem for the
ministry to match these two sets of data which are being produced by them. Doubts are there with all the minds which are
concerned with this industrial data. But
still we all are witness to the fact that our equity market (BSE and NSE) put a
lot of cognizance to IIP data when it is first released. In the recent past too these indices did fall
heavily, if the IIP had shown downward industrial production. Latter, many
forget and don’t bother its revisions as well.
