Data whirlpool

For economy watchers, these are statistically bewildering times. The recent set of GDP data revealed a dramatic increase in the growth rate for 2013-14. Now, the base year for the consumer price index has moved from 2010 to 2012, with lower weights for food items. The change is meant to reflect a shift in consumer expenditure patterns away from food since 2004-05. According to the 68th Round of the National Sample Survey Organisation on consumer expenditure, the proportion of monthly expenditure on food has fallen in rural areas from 55 per cent in 2004-05 (and 53.6 per cent in 2009-10) to 48.6 per cent in 2011-12. In urban areas, this fell from 42.5 per cent in 2004-05 to 40.7 per cent and 38.5 per cent, respectively, in the two subsequent years. Likewise, the CPI weights for food have changed from 47.58 to 45.86. It is perhaps just as well that the weights have not been revised downward to the extent indicated by the NSSO findings. A sharp fall in food budgets at a time of high food prices and tepid growth over the last three years seems counter-intuitive. The Central Statistical Office could have waited for a couple of years to be sure of a stable trend, rather than go by consumption in a period of atypically high food inflation. There can be no argument against periodic revisions of base year and index weights. The point is to carry it out during stable periods rather than over pre-determined intervals. The NSSO should review its survey methods to examine the scope for non-sampling errors — those arising out of a change in recall periods, for instance.

A 5 per cent rise in consumer prices in January, a wee bit higher than in December, cannot mean very much. This is not only because the figure per se is modest, and way below the Reserve Bank of India’s 8 per cent target for this fiscal. The new series for CPI and GDP should be given time to take root and assume meaning over time. UPA stalwarts have lost no time in claiming that the revised GDP numbers point to their success in reviving the economy in 2013-14, even as the truth lies elsewhere. The new growth figures are derived from a larger corporate data base, capturing value added more accurately (both, output and productive efficiency leading to a rise in profits). While the need for fine-tuning of this sort cannot be disputed, the stagnation in physical output also tells a story.

The IIP, a measure of physical output, is full of inadequacies. But if IIP growth has been poor or negative for four years, and 1.7 per cent in December, it cannot be wished away. The basic facts remain unaltered: that industry is down in the dumps and inflation is not really the problem anymore. The takeout for the RBI and the Centre remains unchanged — physical output requires a push, notwithstanding the ‘value added’ by the new estimates.

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