Experts punch holes in IIP data

The manufacturing sector’s upsurge by 8.5 per cent in January against a growth of 1.8 per cent in the last month,and a sudden spike in consumer non-durables sector to 42.1 per cent

Written by ENS Economic Bureau | New Delhi | Published: March 13, 2012 1:31:07 am

The manufacturing sector’s upsurge by 8.5 per cent in January against a growth of 1.8 per cent in the last month,and a sudden spike in consumer non-durables sector to 42.1 per cent has raised doubts among economists about the veracity of the Index of Industrial Production.

“It is the problem with data collection itself. IIP has been plagued with the problem for sometime now. There might be two explanation for this: data doesn’t flow in for months and then its collected and put up all together in one month. Secondly,it might be that you get data only from one or two plants and then it is extrapolated for the entire category… Except these,there is no economic rational explanation to this,” Abheek Barua,chief economist,HDFC Bank,said.

As to whether the data is reliable enough to be used by the central bank while taking decisions for rate cut,he said that the RBI “will use it with great degree of caution.”

Pronab Sen,principle advisor to the government said that the sharp jump in consumer non-durables is “actually quite surprising”.

Food products and beverages category,which accounts for over 72 per cent in the total manufacturing sector,grew by 92.6 per cent,leaving experts baffled.

Items like chewing tobacco grew by 127.3 per cent,marble tiles by 69.4 per cent,newspapers by 57.1 per cent and pens by 31.8 per cent.

Petroleum coke (246.6 per cent),lenses of all kind (72 per cent),insulated cables (57.5 per cent ),boilers (46.4 per cent) and heat exchangers (46.3 per cent) also showed sudden spurt in growth.

Country’s chief statistician,TCA Anant,however,said that IIP numbers have always witnessed volatility as volatility is inherent in the production data for certain categories.

“The problem is with the method of calculation. We take last year’s index from a fixed set of reporting entities and the production is so volatile that it leads to unusual figures. The volatility has been nothing new. The basic problem is inherent volatility in production data for certain entities. It depends on lot of things like availability of resources,etc. for rectifying it you need a different kind of index,a methodical evolution,” he said.

The data,however,does not present a very optimistic picture of the economy given the fact that the cumulative growth for April-January has been only 4 per cent.

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