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Home / Politics / Policy /  Govt set to release IIP, WPI new base year series

New Delhi: The government is set to release the new Index of Industrial Production (IIP) and Wholesale Price Index (WPI) series with 2011-12 base year replacing the 2004-05 base years on Friday. Analysts believe that though the new series will be able to capture the current state of affairs of the economy by replacing the old basket of goods with a contemporary one, but it will still not be able to reduce the volatility in the indices.

The move will bring all the key macroeconomic indicators—IIP, WPI, CPI (Consumer Price Index), national accounts—on a common base of 2011-12, making the comparisons easier.

IIP, a measure of the factory output, has undergone revision of its series after 13 years. The old series being used has become obsolete, part of the IIP basket is no longer in production, many of the contemporary products are not being tracked by it and many products are under weighed. Analysts believe that the series with a new base year would be more comprehensive in nature.

“LED TVs, smartphones, laptops, tablets and fast moving consumer goods will be covered under the new IIP basket of goods," said Sunil Kumar Sinha, principal economist at ratings company India Ratings Ltd.

According to the recommendations of the working group for the development of the methodology of compilation of IIP, the new item basket for IIP will include 55 mining products and 809 manufacturing products that would be re-grouped into 521 item groups, treating electricity as a single product.

However, economists believe the problem of volatility would still persist in the IIP indices.

“Base change is essentially done to change the basket of goods and this change in IIP series would make it closer to the current production structure. Volatility in itself is mostly a real life problem and not a statistical problem. If it’s a real life problem then data should capture and change in base year will not make much difference," said Pronab Sen, former chairman of National Statistical Commission.

“Capital goods, one of the components of IIP, is volatile in nature. Changing the base year series would not help much in this case," said N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy.

Also, economists said that the new series would not ease the divergence between the IIP and GDP estimates much.

“Though the new IIP series would address the issues that arise on the difference in composition with the GDP series. But some divergence would continue owing to the construction of the indices, with IIP recording volumes and GVA focusing on value addition," said Aditi Nayar, principal economist, ICRA Ltd.

The government will also be releasing new WPI series with 2011-12 base year. Analysts believe that changes in the updated WPI series would be less dramatic. Though the new basket of goods would bridge some kind of gap which persists between the WPI and CPI numbers, the problem of volatility will remain.

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