Smartphones, laptops may enter new IIP, chocolates, guitars likely in WPI

Both data series to be updated to 2011-12 base year; cathode ray TVs are now passe

New-age items such as smartphones, laptops and tablets are likely to enter into the new series of the Index of Industrial Production (IIP) to be launched on Friday. Similarly, chocolates, noodles, harmonium, guitars, cricket bats and balls may be included in the new Wholesale Price Index (WPI).

Both the indices will have a new base year of 2011-12 against the current 2004-05 to bring them at par with other macro economic data such as gross domestic product and the consumer price index.

Also, games and toys may be made a separate category in WPI, under which items such as dolls, cycle, carrom board, playing cards, among others may come, an official said.

Besides football, which was already part of the current series, other sporting items such as tennis and badminton racquets will be added to the sports category list, he said.

While mobile phones have been on IIP since the 1993-04 series, they included only the old bar phone models.

For long, economists and think-tanks have been pitching for release of new time series of IIP and WPI, so that GDP numbers can be based on more accurate and realistic data.

Minister of state for Commerce and Industry Nirmala Sitharaman said,"Many of the industries included in the 2003-04 IIP and WPI indices are not even there now because the nature of production have changed. IIP and WPI therefore have to solve the problem of relevant number of industries as well as relevant industries."

The official said there have been repeated complaints regarding the list of items covered under IIP not being comprehensive enough. To that end, more items in the fast-moving consumer goods categories will be included.

New Macro data series: What to expect

More focus on consumer goods across the board to better map consumer demand

Tech items such as smart phones, tablets and laptops may be added

Greater sample size for items

"Items which figure significantly in the IIP database like cathode ray televisions are completely archaic." Devendra Pant, Chief Economist at India Ratings said.

These do not represent the manufacturing nor buying pattern by today's consumers who have moved to other items, in these case due to better technology, he added.

To address the issue of volatility which has come to describe the IIP, the new index may also include the value of production of some capital goods apart from the whole product.

The idea had originated from the suggestions of a high powered committee on the issue, led by eminent economist and member of the erstwhile Planning Commission, the late Saumitra Chaudhuri.

The value should be used for indexation in those capital goods which have a large gestation period or are difficult to aggregate, the committee had said.

The IIP denotes the level of output in manufacturing, mining and power in physical volumes. There has often been criticism of IIP's divergence with the GDP growth data. The change in the base year to 2011-12 will blunt that criticism, but variance between these two data may still remain.

The reason is even the provisional data of new GDP series takes only just one-fourth of its data on industry from IIP and the rest is compiled from corporate filings in the ministry of corporate affairs and with the stock exchanges.

Currently the weightage given to manufacturing at more than 75 per cent makes it the most observed sector. Mining has 14.1 per cent and electricity at 10.3 per cent weights.

Within these broad sectors, IIP also gives a broad outlook on output of various types of goods like basic, intermediate consumer and capital ones. To this end, the sample size of every item will see a rise, the official added. The sample size refers to the number of factories from which data is collected for every item.

The current series covers 682 items, comprising 61 from mining, 620 from manufacturing and 1 from electricity.

The government has also asked the states to come out with their own IIP on a monthly basis by the end of 2017-18.

India now has a retail inflation measure, but because of its much longer history, the WPI is still tracked.

(With inputs from Sanjeeb Mukherjee)