The Reserve Bank of India (RBI) often mentions its OBICUS survey (order books, inventories and capacity utilization survey), which it carries out quarterly in its monetary policy statements. Capacity utilization, in particular, is an important gauge of the state of the industry, and it helps determine whether firms have pricing power. The latest OBICUS survey (18th round) says capacity utilization during the first quarter of FY13 is the lowest in 13 quarters. According to the survey, it was at 72.9% in the June quarter, down from 79% in the fourth quarter of FY12 and much lower than the 76.3% capacity utilization in the first quarter of FY12.

But before we jump to any conclusions, let’s examine the numbers in greater detail. Let’s take the capacity utilization data for the first quarter of FY10. The 18th OBICUS round puts it at 73.3%; the 17th round put it at 71.4%; the 16th round at 69.9%; the 15th round at 71.9%, and the 14th round at 70%. It’s understandable if the data for the recent quarters is revised, but why should the numbers for three years ago be revised? Moreover, the discrepancy is not for a particular quarter; it’s for every quarter. If we took the data for Q1, 2011-12, according to the 14th round, capacity utilization was 72.3%, lower than that for the first quarter of 2012-13, according to the 18th round. Which round do we believe?

Intrigued, we tried to find out the reasons for these apparently random changes. A source at the central bank explained, “The data is revised every quarter because the sample of the survey changes, since it is not mandatory for all the companies to participate in the survey. Some of the large companies refrain from participating in the survey due to some unforeseen reasons and their data may not be reflected in the survey results at aggregate level in this quarter and do not reveal the complete scenario of the manufacturing sector."

The capacity utilization data is revised for every quarter for the past 13 quarters because the sample size under the coverage changes. For example, in the June quarter, around 1,154 manufacturing companies were surveyed, while in the March quarter around 1,167 companies participated.

RBI uses this data to formulate policy. For instance, the recent second-quarter review of monetary policy had this to say: “According to the Reserve Bank’s order books, inventories and capacity utilization survey, capacity utilization of the manufacturing sector in Q1 of 2012-13 declined from the preceding quarter and a year ago."

The question is: Don’t the frequent changes in the data make it meaningless and should it be used as an input for policy decisions at all?