New Delhi: In an attempt to accelerate the development of a new Index of Industrial Production (IIP), which is expected to be more reliable than the one currently being used, the government has decided to use the services of private economy and corporate tracker, the Centre for Monitoring Indian Economy, or CMIE.
The move comes less than a year after the termination of a five-year deal between CMIE and the government to collect exactly the same data.
“The agreement has been signed between CMIE and DIPP and we are looking forward to make a big difference in the data collection system,” said Mahesh Vyas, managing director and CEO, CMIE. The department of industrial policy and promotion, or DIPP, is part of the country’s ministry of commerce and industry and is responsible for collecting most of the data that goes into the index.
A DIPP official, who did not want to be named, confirmed that an agreement had been signed. Neither the official nor Vyas was willing to provide additional details before a press release to the effect is released on Tuesday.
The current Index of Industrial Production has 1993-94 as its base year. It showed industrial growth plummeting to a 10-year low at 1.3% in August this year, sending shockwaves among the industry and policymakers, many of whom promptly rubbished the index. India’s finance minister P. Chidambaram said publicly that the data was not “reliable”. The new index uses 1999-2000 as its base year.
Data overhaul: A Honda car plant in Surajpur. IIP showed industrial growth at 10-year low in August, which led many to rubbish the index. CMIE will help develop a new IIP that is expected to be more reliable. Ramesh Pathania / Mint
“This is a very good development and hopefully will improve the quality of data as CMIE has extensive experience in collecting company-level data,” said HDFC Bank’s chief economist Abheek Barua.
Another economist, however, warned that CMIE was given to overly optimistic estimates.
“Some of the projections by CMIE like the 9% growth forecast for the current fiscal also do not reflect the ground reality. So, neither extremely dismal IIP figures nor extremely robust IIP numbers are desirable,” added this person who did not want to be named.
Interestingly, CMIE was involved in collecting industrial production data for DIPP for five years starting 2002. This contract, however, wasn’t renewed after its termination in November 2007. Since then, DIPP has been collecting the data itself. Though IIP is calculated and released by the Central Statistical Organisation, 15 source agencies, including DIPP, Indian Bureau of Mines, Nagpur, Development Commissioner Small Scale Sector (DCSSI) and Central Electricity Authority and the railways collect the data. DIPP is the largest source agency and provides data for 209 of the 543 items in the IIP basket.
The current index is considered non-representative because it includes many products that have outlived their relevance such as typewriters and does not include items whose importance have grown over the recent years such as microwave ovens and mobile phones.
The new index with an expanded basket of 886 products has been ready for a year. Its release, however, has been delayed by DIPP’s inability to collect data.
Hiring CMIE would help because the company already had a database, said an official at the ministry of statistics who did not want to be named. A senior official at the finance ministry, who did not want to be named, said CMIE should share “unit-level data” so that it “can’t hold the government hostage once the contract is over”.