IIP growth slumps to 1.3%, govt says data is the culprit

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New Delhi, Oct 10 : “Down, down, down.” That was Union commerce & industry minister Kamal Nath’s first reaction to the slowest growth seen in India’s industrial production for over a decade, as the minister walked towards his office. The index of industrial production (IIP) for August, released by the Central Statistical Organisation on Friday, reflects a growth of just 1.3%, sharply down from 10.9% a year ago and 7.4% in July.

Minutes later, Nath admitted what experts, including Prime Minister Manmohan Singh, have been saying for a while – the official data on industry is not reliable anymore. “There seems to be a mismatch between the ground reality (and the IIP). We are not seeing any closures or shutdowns (in industry). This data is on a 1993-94 base, and does not capture the more dynamic parts of the economy. So we are reviewing this,” Nath said.

Finance minister P Chidambaram also dismissed the IIP numbers as incredible: “The IIP numbers are not very satisfactory and at the same time they are not very right. An independent economist has pointed to me that at least two to three features of the current IIP are quite out of line with any kind of calculations,” he said.

Intermediate goods production, which fell by 6.2% in August compared to a 13.8% surge last August, “does not sound right at all,” the FM stressed. “So the IIP numbers have to be looked into more carefully. Please remember what happened to the IIP numbers of July, which have been revised upwards to 7.4%,” Chidambaram pointed out.

“We need to do an independent analysis of the dynamic sectors that are not covered under the 1993-94 framework used to compile IIP data. We will be calling mobile phone producers, FMCG majors like Hindustan Unilever and consumer durable manufacturers like LG and Samsung to ask for their sales data,” said Ajay Shankar, secretary, department of industrial policy and promotion.