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Journalism of Courage
IIP data must be made more accurate through a faster upgrade of the base year and basket
The Central Statistical Organisations CSOs latest goof up,which forced it to revise the index of industrial production IIP for April twice in 27 hours,points to a syndrome. While it may be a fact that data collection and compilation have become better over the last few years,it is also true that there is tremendous scope to improve the quality of data and expand the coverage,especially when it comes to industrial output. Policymakers have often used data revisions by the governments own statistics department and rightly so to paint a different growth picture. A statistical problem in estimating economic indicators erodes market confidence because it adversely affects bond and equity markets.
The new IIP index,with 2004-05 as the base year,did attempt to capture the changing industrial structure,but it still fails to account for the unorganised sector,which is estimated to contribute as much as 50 per cent to the GDP. The dramatic changes in the Indian economys composition,which not so long ago was dependent more on agriculture,will induce larger errors in GDP estimates if industrial output data is not accurate enough. The need of the day is a faster upgrade in both the base year and the basket of the IIP.
