India Industrial Production Index is not beyond repair

Source– The post is based on the article “India Industrial Production Index is not beyond repair” published in Live Mint on 13th September 2022.

Syllabus: GS3- Indian Economy

News- The article explains the discrepancies in IIP data and suggestions to improve it.

Various analyses have shown that IIP has understated growth in industrial output over the last decade and its unreliability.

Which are the studies conducted on IIP related issues?

Rangarajan Commission in 2001 was the first official panel to flag serious discrepancies in IIP data.

Committee on financial sector assessment by the RBI and Union government in the mid 2000s reiterated the concerns.

National Statistical Commission appointed N.S. sastry for conducting audit of IIP data. It found problems with collection and validation of data.

The Parliamentary standing committee asked for another review in 2012.

The Suamitra Chaudhari panel was set up in 2014.

The National Statistical Commission on real sector statistics in 2018 by Sudipto Mandle raised concerns about IIP reliability and understating growth in industrial output.

A 2020 working panel by some economists raised the issue of bizarre growth in some components of IIP.

What are the issues with the current system?

Post-liberalisation, there is broader erosion in state capacity to track private sector growth.

There is a lack of a comprehensive and dynamic firm level database. The existing

One from the economic census to the MCA-21 are not representative of the entire industrial sector.

There is a lack of effective statistical leadership. The Statistical Ministry is not able to coordinate raw IIP data spread across various Ministries.

Lack of capability with statisticians to validate raw data before accepting it as meaning statistics.

How to make improvements in the IIP index?

Monthly release of index should include number of sampling and no-corresponding units for each item.

GST database can be used. An accurate and dynamic business register is needed.

New databases need to be tested and release in a validated database for public feedback before being plugged into the statistical system.

Statistical governance and disclosure norms need to be improved.

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