Global economic crisis had hit India?s industrial output much harder than estimated by the old calculations of the Index of Industrial Production (IIP) in 2008-09.
Even in the following year in 2009-10, when the Indian economy started recovering from the crisis, industrial expansion was much lower at 5.3% according to the new series of IIP, as compared to 10.5% under the old series of IIP.
This comparison has been made by the Prime Minister?s Economic Advisory Council (PMEAC) in its Economic Outlook 2011-12 released on Monday. The PMEAC said the old series substantially underestimated the industrial output growth in the three years preceding the crisis year of 2008-09.
For instance, the old series pegged the IIP growth at 8.7% in 2007-08, whereas, as per the new series, IIP growth was actually 15.5%. That means an underestimation of almost 7 percentage points. ?The revised series shows an output growth pattern that is fairly different from what the old series has indicated,? PMEAC said in its report.
The government came out with new series of IIP in order to better capture the industrial activity in the economy. The new IIP series is based on a more recent base year of 2004-05, in contrast to the outdated 1993-94 base year which was being used for the old series. The new series also had more items and different weights when compared to the old series.
?If we were to focus on the last four years, it is quite clear, that output growth was grossly underestimated by the old series in 2007-08 and overestimated in 2008-09 and 2009-10,? said the EAC report. ?The second aspect highlighted by the new data series is that the impact of the global crisis on industrial output was much stronger that had been indicated by the old series.? the report said.
?In the year of global recession (and slowdown in India), the new series showed much sharper dip in industrial output growth when compared with the old series of IIP,? said TCA Anant, chief statistician of India.
?The other fact thrown up by the new series is that the recovery was over-estimated by the old series. Finally, the output growth in the second half of 2010-11 was actually stronger, going by the new series, than what had been indicated in the old one,? the EAC report said.
It said this divergence in data highlights the need to regularly update base year weightings. The National Statistical Commission suggestion for updating base years once every five years should be rigorously followed, the EAC said.
