The Ministry of Statistics and Programme Implementation (MoSPI) has released a discussion paper proposing seasonal adjustment of the Index of Industrial Production (IIP) to mitigate the distorting effects of moving festivals and other calendar variations on monthly data.
The adjustment aims to remove predictable seasonal and calendar effects, allowing for a more accurate assessment of underlying trends in industrial activity, the ministry stated.
Until now, the National Statistics Office (NSO) under MoSPI has released only the unadjusted (original) monthly IIP, which tracks changes in output across the mining, manufacturing, and electricity sectors.
As part of the ongoing base year revision exercise for the IIP, shifting from 2011-12 to 2022-23, with the new series scheduled for release in May, MoSPI is revisiting methodologies, incorporating new data sources, and consulting stakeholders.
Impact of Festivals
MoSPI on Wednesday released Discussion Paper 3.0: Seasonal Adjustment of Index of Industrial Production. The discussion paper highlights that high-frequency data like IIP are often distorted by seasonality, including India’s unique moving festivals (Diwali, Holi, Dussehra, Id-ul-Fitr etc.) that shift across Gregorian months due to lunar cycles.
The influence of these moving holidays can include the loss of working days and changes in economic and social behavior, the discussion paper reads.
Adopting Global Standards
“Many official statistical agencies are now disseminating seasonally adjusted IIP series in light of increasing demand for such data and explicit recommendations from multilateral institutions.
Therefore, the issue was deliberated at length in the Technical Advisory Committee for Base Year Revision of All-India Index of Industrial Production (TAC-IIP),” the discussion paper notes.
MoSPI has invited feedback from experts and stakeholders on the proposed methodology by February 12.