State specific IIP needed for comprehensive view of production: Economists

Centre has asked states to bring out monthly state IIP figures on 2011-12 base year

States bringing out their own Index of Industrial Production (IIP) is crucial for understanding a comprehensive view of industrial production in the country as well as uniformity in the statistical exercise, economists say.

Media reports on Monday suggested that the Center has asked state governments to release monthly IIP figures to verify the country’s total factory output. At present, just 14 States release their own IIP figures with some states compiling monthly data while others prepare quarterly numbers. Also, the data is not shared with the Center in some cases.

"State IIP figures should off course be compiled and made public. While different states would have different industrial production baskets, it would provide a comprehensive view of factory production in the country," Chief Economist at Crisil Research D K Joshi said.

The government has asked states to start the exercise by the end of 2017 and have mandated that the calculations be done on the revised base year of 2011-12. "From the standpoint of statistics, some states have moved on while some haven't. Making it uniform for all will have a huge benefit," Madan Sabnavis, chief economist at CARE Ratings said.

However, the national IIP series continues to be calculated on an older the base year of 2004-05. Economists have continued to blame this old base year for not capturing the true extent of industrial production and consumption in the country. The index has also been targeted for getting swayed by volatility faced by a single item. 

The government targeted the end of 2016 as the deadline to update both the IIP as well as the Wholesale Price Index indices, in order to make them more representative of the changing economic scenario. However, senior government officials said the new IIP series with the base year of 2011-12 is expected to make its debut in 2017.  A Committee of Secretaries led by the Cabinet Secretary has also approved the Center’s revamped IIP series, a DIPP official said. However, he added that comments from various ministries have been asked for before final approval.

As part of the revision, the basket of items and weightage assigned to different entries on the basis of which indices is computed will be updated. The new index is also expected to have a fresh and more modern basket of 450 items, including plasma TVs and tabs, that would reflect current consumption patterns. The current IIP series has 399 items.

Since industrial production varies in each State, the Central Statistics Office had to compile specific IIP baskets for each state using the Annual Survey of Industries 2011-12. States can rework the item baskets if required.

Belying popular expectations, India's factory output, as measured by the  IIP released earlier this month, rose 5.7% in November, the first month of the government's demonetisation drive. The Index had declined by 1.81% in October. However, Crisil Research has said that the latest figures do not reflect the true condition of the Indian manufacturing sector.

Terming the data as a false positive, Joshi had said IIP was expected to be in the negative zone as November was the first month to have captured the impact of demonetisation.