New Delhi: The government has decided to end a contract with the Centre for Monitoring Indian Economy (CMIE) for collecting data used in calculating the Index of Industrial Production after the central bank governor and economists questioned the accuracy of the index.
The department of industrial policy and promotion (DIPP) will collect the data using its own resources, said a DIPP official, who declined to be identified.
“The contract with CMIE was ending in October this year. We have extended it by another six months to facilitate a smooth transition,” the official said.
CMIE was involved in collecting industrial production data for DIPP for five years starting 2002. The contract wasn’t renewed after its termination in November 2007. However, to accelerate the process of release of a new IIP series with 2004-05 as the base year, DIPP rehired CMIE in November 2008.
The volatility and unpredictability in the IIP in recent times may have led to the termination of the contract, said N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy.
“The relationship between DIPP and CMIE has been unstable for some time as only the government was facing the heat for the volatility of the IIP,” he said.
The latest series faced scathing criticism from private agencies and government bodies for its volatility. Reserve Bank of India governor D. Subbarao has said the volatility of IIP was “statistically bewildering.”
The DIPP official, however, said the purpose behind hiring CMIE was to tackle the expanded items and units under the new series. “Because the launch of the new series got delayed, we extended the contract with CMIE,” he said.
Mahesh Vyas, managing director and chief executive of CMIE, declined to comment citing a confidentiality clause in the agreement between his company and DIPP.
National Statistical Commission chairman R. Radhakrishna said though a statistical audit of the IIP by the ministry of statistics and programme implementation has recommended that the Central Statistics Office (CSO), a part of the ministry, collect the data for the index, a final decision has not been taken.
“The report has been circulated for comments from experts. Once we receive all the comments, we will take a final call on the report,” said Radhakrishna.
Radhakrishna said DIPP may be acting independently on the matter. “They have to outsource the collection of data to some agency. They do not have the staff even to follow up if there is a delay in sending data by a unit,” he said.
The IIP audit report, authored by statistician N.S. Sastry, holds that the major implication of the agreement between DIPP and CMIE is that “the DIPP is not confident of ensuring adequate response from the manufacturing units for regular monthly production data by itself.”
Mint has reviewed a copy of the report.
“The CSO, which is the nodal agency and accountable for the overall quality of the all-India IIP, must assume full responsibility for arranging the collection of source data directly from the units,” the report concluded.
Abhijit Sen, a member of the Planning Commission who also chaired the committee that finalized the new WholeSale Price Index (WPI) with 2004-05 as the base year, also had concerns regarding the CMIE data.
Sen said the collection of WPI data under the new system of voluntary return by manufacturers has improved dramatically. “Roughly, you can get the IIP data from the same firms that provide WPI data. A mix of voluntary return and constant reminders can work for IIP,” he said.
CSO, the nodal agency to compile the IIP data, released the new series data starting June. Though IIP is calculated and released by the CSO, 15 source agencies, including DIPP, Indian Bureau of Mines, Central Electricity Authority and the Indian Railways, collect the data.
DIPP is the largest source agency and provides data for 268 of the 676 items in the IIP basket.