Industrial production index signals the health of the industry which holds the backbone of economic growth especially for a developing country.
Industry?s response to the various factors impacting the political and socio-economic scenario is reflected in IIP indices which was negative (-1%) in May 2011 compared with the previous month and 14% lower than March?11. Official data shows that maximum fall in output have been observed in Capital Goods, Manufacturing of electrical machinery and apparatus, machinery and equipments and motor vehicles. But the conclusions thus drawn based on the indices released cannot be said to be final as the data for April 2011 which has already gone for first revision would undergo another final revision when the data for July 2011 is released in September 2011. This implies that nothing can be concluded if industry witnessed a higher growth in the first month of the new financial year over the next month until a gap of four months. This makes short-term planning for industry a bit difficult.
Collection of data from various agencies is not an easy task in view of normal delays and reluctance in reporting, non-receipt of production figures from the different units in time and the bunching of data after a gap of few months. It is generally felt that data received by the monitoring agency are not regularly analysed with regard to the periodicity of bunching of data, changing the source of data in tune with the reorganised role of the unit/agency and similar other factors.
There are numerous instances when production data is religiously repeated long after the closure of the unit. The argument that governmental data collecting agencies have no wherewithal to check the authenticity of the data, offers little justification for the success or failure of policy guidelines for the specified group of industry. PMI indices indicate relative perception of the market by the participants and generally offer a basis of comparison of the state of industrial economy particularly the manufacturing sector across the country.
However, compared to the market perception of the selected group there is an essential need for absolute numbers which are robust and without which the government is incapable of adopting suitable policy changes. Surely there exist many innovative, cost effective methods by which reliable and authentic data with regular periodicity can be captured and utilised for policy decisions. A much more effective way of interface with the industry, associations, and chambers only on the issue is needed to bridge this wide gap between reality and data-based facts.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal.