The government is working on changes to improve the credibility of the index of industrial production (IIP) data, with economists questioning the volatility and frequent revisions.
According to sources, the Ministry of Statistics and Programme Implementation (MoSPI) has constituted a technical advisory committee, headed by Mridul K Saggar, a former member of the monetary policy committee (MPC). Apart from aligning the base year of IIP with the proposed new Gross Domestic Product (GDP) series, the panel will explore the use of further datasets for IIP computation.
The base year for the IIP is now 2011-12. The ministry, as reported earlier, is aiming to introduce 2022-23 as the new base year for the GDP and release the first estimate in February 2026 on that base.
As per an official notification, dated September 27, the Saggar committee shall deliberate on aligning the IIP’s base year with that of the GDP. A member of the committee told FE, “We will work on minimising the frequent revisions in the IIP numbers, while maintaining the integrity of the data.”
The committee is waiting for the results of the Annual Survey of Industries (ASI) 2022-23 to begin its deliberations, as data from this survey would be used for the computation of the new factory output series, the member said.
In June, MoSPI constituted a 26-member committee to oversee the revision of the base year for national accounts. As many as 809 items are part of the current IIP series with a base of 2011-12, which are clubbed into 405 “item groups” pertaining to the ‘manufacturing’ sector. The ‘mining’ and ‘electricity’ sectors are represented by a single item index. The 2004-05 IIP series consisted of 620 items clubbed into 397 item groups for the ‘manufacturing’ sector, and one item each for the ‘mining’ and ‘electricity’ sectors. Manufacturing has a weight of 78% in the current index.
For the monthly computation of the IIP, data from 14 agencies is sourced by MoSPI. These agencies include the Indian Bureau of Mines (IBM), Directorate of Sugar & Vegetable Oils, Tea Board, Coffee Board, Textile Commissioner, Coal Controller, Ministry of Petroleum & Natural Gas, Joint Plant Committee (Iron & Steel), Railway Board, Department of Industrial Policy & Promotion, Department of Chemicals & Petrochemicals, Department of Fertilisers, and Central Electricity Authority.
The new series of IIP is likely to source data from more agencies for monthly numbers, sources said.
Besides Saggar, the other members of the IIP base year revision committee include Suresh Babu M, director of the Madras Institute of Development Studies; Soumya Kanti Ghosh, group chief economic advisor at SBI; Ila Patnaik, chief economist at Aditya Birla Group; and Manish Kumar Sinha, CEO of the Goods and Services Tax Network (GSTN).
Saggar is currently Professor of Practice (Economics) at IIM Kozhikode.