The BL Interview. CSO to begin updating base year of national accounts, IIP, WPI

There will be more similarity between the data on factory output and the data on gross value added in the manufacturing sector with the updated base of the Index of Industrial Production, said TCA Anant, Secretary, Ministry of Statistics and Programme Implementation, while cautioning that some “intrinsic differences” will remain.

In an interview to BusinessLine , Anant said that the Central Statistics Office is also working to keep macro-economic data indices up to date and has begun work on another base year revision. Excerpts:

Will there be more correlation between manufacturing GVA and the new series of IIP?

In the old series there were two reasons why IIP and GDP manufacturing diverged. One reason continues to be valid — GDP measures value added and IIP measures production. There will be a divergence between value added and production. The earlier IIP also suffered from two major lacunae. Its item basket was representative of 2004-05 and not of 2011-12 which is the base year of the new GDP series. Also, many of the entities that were used to measure production in 2004-05 are no longer important now. So the IIP data would not have been describing output in line with the production structure of 2011-12. This has been corrected and to that extent, data from IIP and GDP manufacturing will be closer.

Will the index of eight core industries also be updated?

The Department of Industrial Policy and Promotion (DIPP) is better suited to speak on it, but I understand that they will be releasing the core sector index in light of the IIP coverage. The core sector doesn’t capture all the items covered in IIP but the production entities from which the core sector is estimated will be updated and in some cases the item classification will be changed.

Is there any move to a producer price index (PPI)?

That has been a long standing demand. The DIPP has a committee trying to put together a PPI and the updated WPI series will help in it. We have taken one step towards the PPI. The WPI data is much more coherent with the PPI. But such an index also requires data on service price for which a separate exercise is underway. However, service prices are more difficult to compile than manufacturing prices, as the services sector is very heterogeneous and many items don’t lend themselves to a natural price. So measures have to be devised to find an appropriate pricing mechanism. That is a research programme that DIPP is coordinating.

How will the technical review committee for IIP and WPI work?

The broad structure will remain as it is but within the three-digit grouping, the committee will look at the representation of the items and the entities from which the items are being captured. Keeping the structure of the index as has been recommended, the review committee will examine everything else that goes into the IIP and whether anything needs to be done to improve it.

When will the next exercise for base revision begin?

We are starting work on a base revision for IIP, WPI and national accounts almost immediately. An exercise is underway to see which is a better base year — 2016-17 or 2017-18. For either of the years, the information will be available only after the year is completed. The base revision takes some amount of time. For instance, for the revision of the IIP, one of the inputs is the Annual Survey of Industries. The ASI is compiled using financial records of a company, which can take up to six months after the closing of a financial year. Once the ASI comes out, we will examine that and work out the basket of IIP.

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