Difficult to reconcile IIP & data on firms' sales, says Mospi

Even as the Prime Minister’s Economic Advisory Council (PMEAC) pitched for results of companies as a barometer for industrial performance, instead of the Index of Industrial Performance (IIP) in the gross domestic product (GDP) data alone, the Ministry of Statistics and Programme Implementation (Mospi) said the two data were completely different. It said there would be great hurdles in reconciling these, as data on companies’ results related to sales, while IIP data related to production.

The debate, witnessed earlier as well, was revived after IIP showed 19.6 per cent contraction in the production of capital goods in the quarter ended June, while the 17 companies in the Bombay Stock Exchange’s Capital Goods Index saw a 16 per cent rise in net sales.

A Mospi official said production might not necessarily lead to sales and sales might not reflect production, as the company might be selling inventory. “So, detailed analysis and examination of companies’ sales, inventory, production and whether services are also included in the sales earnings of companies, are required,” he said, adding the Central Statistics Office (CSO) was following the practice recommended by the UN Statistics Division.

Another official said a committee assessing the current IIP, chaired by Planning Commission member Saumitra Chaudhuri, might hand over the task to a sub-committee. The contraction in IIP was in sync with merchandise trade data, showing contraction for three consecutive months this financial year (for exports and imports), the official said, adding had production been good, it would have been reflected in exports and imports.

“There will be a need to collectively study and analyse various aspects like export, import, and production,” the Mospi official said, adding it would be a complex procedure.

On the disparity between IIP figures and results of companies, Chaudhuri, said industrial growth figures were used as a proxy for manufacturing in GDP data till the Annual Survey of Industry (ASI) came out with data after two years. Though data was revised two years after provisional figures were released, this was merely an academic exercise, he added. So, something should be done for the period till the ASI releases data. “If you see the ASI and IIP, the divergence is increasing. Recently, corporate data is diverging from ASI data. The CSO would take a view and decide what to do,” he said.

Prima facie, there was a problem in IIP, he added. “Yes, corporate results can be used as validation to see whether there is a match or not,” he said.