Govt announces new IIP, admits flaws

The new items have been selected on the basis that each accounts for at least Rs 80 crore of gross value of output at overall manufacturing sector level and Rs 20crore of gross value-added output at the ultimate digit level of the National Industrial Classification (NIC) of 1987.

The revised IIP, formulated by the Central Statistical Organisation (CSO) under the planning ministry, has enhanced weightage of the manufacturing sector to 79.358 points from 77.107 points while reducing mining to 10.473 from 11.464 and electricity to 10.169 from 11.429 points.

Interestingly, the revised IIP only provides for 28.845 per cent weightage for the unorganised sector in the overall manufacturing group despite the fact that statisticians claim that unorganised sector’s contribution to the economy is more than 60 per cent.

The new series would not only suffer from substantial non-response on part of manufacturing units, but also from the fact that contribution from unregistered sector, included for the first time in IIP, would not be reflected in the series, an official release said.

Moreover, the source agency responsible for small scale sector could not line up productiondata for the items of the revised series which has taken into account only 18 items from this sector included in the existing series, it said. A backgrounder note prepared for the new series has said following liberalisation of licensing procedures, there has been a steady decline in submission of production returns by industries due to lack of control and penal provisions.

It said the data supplied by industry ministry consisted of a large amount of estimation to make up for non-responding units and accounted for nearly half the IIP weightage. In fact, the industry ministry has no information on the number of small scale units or any data on them, the note circulated by government today said. The note said there were views that India’s gross domestic product (GDP) was underestimated as a result of the quality of data.

Even less developed countries like Bangladesh and Pakistan have overtaken India in terms of per capita income which seems unrealistic, the note said.

It said government would cut downthe time lag in the release of IIP data to less than six weeks from the prevailing seven to eight weeks.

The index has enhanced the weightage of food products and beverages, tobacco and related products. It has reduced the weightage of cotton textiles, jute, paper, rubber, plastic, petroleum and coal products, basic metals and alloys.