Quick
Estimates of Index of Industrial Production
and Use-Based Index for the Month of November,
2011 (Base 2004-05=100)
(1)
Summary
(2)
Comments (& Analysis)
(3)
Suggestions on
Methodology
(4)
Bat For Growth (reduce
Interest rates)
SUMMARY
The following is the summary of the press release from Govt of India on
the quick Estimates of Index of Industrial Production for Nov’2011.
The Quick Estimates of Index of Industrial Production (IIP) with base
2004-05 for the month of November 2011 have been released by the Central
Statistics Office of the Ministry of Statistics and Programme Implementation.
The General
Index for the month of November 2011 stands at 167.4, which is 5.9% higher
as compared to the level in the month of November 2010.
The cumulative
growth for the period April-November 2011-12 stands at 3.8% over the
corresponding period of the previous year.
The Indices of Industrial Production for the Mining, Manufacturing and Electricity
sectors for the month of November 2011 stand at 127.6, 177.8 and 145.6
respectively, with the corresponding growth rates of (-) 4.4%, 6.6% and 14.6% as compared to
November 2010 (Statement I).
The cumulative
growth in the three sectors during April-November, 2011-12 over the
corresponding period of 2010-11 has been (-)2.5%, 4.1% and 9.5% respectively, which
moved the overall growth in the General Index to 3.8%.
In terms of industries, seventeen (17) out of the twenty two (22) industry groups
(as per 2-digit NIC-2004) in the manufacturing sector have shown positive growth during the
month of November 2011 as compared to the corresponding month of the previous
year.
The industry group ‘Publishing, printing & reproduction of recorded
media’ has shown the highest growth of 69.1%, followed by 41.8% in
‘Medical, precision & optical instruments, watches and clocks’ and 29.3% in ‘Food
products and beverages’.
On the other hand, the industry group ‘Electrical machinery & apparatus n.e.c.’
has shown a negative
growth of 38.7% followed by 8.6% in ‘Furniture; manufacturing n.e.c.’
and 6.4% in ‘Office, accounting & computer machinery’.
As per Use-based classification, the growth rates in November 2011 over
November 2010 are 6.3% in Basic goods, (-) 4.6% in Capital goods and 0.2% in
Intermediate goods (Statement III). The
Consumer durables and Consumer non-durables have recorded growth of 11.2% and
14.8% respectively, with the overall growth in Consumer goods being 13.1%.
Some of the important items of consumer goods showing
high positive growth during the current month and thus contributing to the
growth of the overall index for the month include ‘Woollen carpets’ (110.6%),
‘Cashew Karnels’ (97.3%), ‘Newspapers’ (70.9%), ‘Marble Tiles/Slabs’ (65.3%),
‘PVC Pipes & Tubes’ (49.9%), ‘Sugar’ (41.8%), ‘Rice’ (38.4%), ‘Scooter and
Mopeds’ (37.6%), ‘Polythene bags including Hdpe & Ldpe Bags’ (34.7%) and
‘Leather garments’ (33.5%).
However, some important items of the consumer goods
are also showing negative growth. These are:
‘Coirs, Mats & Mattings’ [(-) 37.5%], ‘Antibiotics and It’s Preparations’ [(-)
19.7%] and ‘Gems & Jewellery’ [(-) 17.0%].
The other important items showing negative growth during the month
are: ‘Cement
Machinery’ [(-)72.1%], ‘Cable, Rubber Insulated’ [(-)65.5%], ‘Colour TV
Picture Tubes’ [(- ) 64.0%] , ‘UPS/Inverter/Converter’ [(-)61.4%], ‘Particle Boards’ [(-)30.3%] and
‘Cotton Yarn’ [(-)18.7%].
Along with the Q.E. of IIP for the month of November 2011, the indices
for October 2011 have undergone the first revision and those for August 2011
have undergone the final revision in the light of the updated data received
from the source agencies. (It may be noted that these revised indices (first
revision) in respect of October 2011 shall undergo final (second) revision in
IIP for the month of January 2012).
COMMENTS
ON THE IIP NUMBERS
Certainly,
these are quick estimates and these will undergo revisions at least twice –
before they become the final version.
Most
Analysts of such Economic Data are now increasingly skeptical about the
accuracy of these Data. Several points of apprehensions need to be addressed by
the Government and the CSO – as quickly as possible.
There can be NO DOUBT what so ever that if these data become a
reliable guide for policy and action – the country will gain very hugely. Not
only the Government, but also, the individual Industry segments (of both consumer
and producers), market makers, Investors
and analysts will all will know very clearly
where they stand, and what their future actions need to be.
There
are disturbing trends in capital Goods sectors which has registered Negative
Growth. Any deceleration in creation of Capital Goods affects Growth not only
in the immediate future but also for a long time to come. This needs to be
addressed quickly.
Also,
many key sectors of economy have shown negative Growth – though overall, there
is a positive Growth in November.
SUGGESTIONS
FOR REVAMPING METHODOLOGY
The
first question that needs to be addressed is – the QUALITY OF DATA.
As in any
case – the following questions need to be asked about the data :-
(i)
Is
the data comprehensive?
(ii)
Does
it include all sources of Data? Is there exclusion of any Product / Product
Group / producer Group?
(iii)
Is
there Duplication of Data? Omission is as much a sin as duplication in respect
of Statistical data.
(iv)
Is
the weight attached to a product or
Group in the Index reasonable in the context of changing Usage / production
pattern? For instance, is the weight attached to computing machinery (at 3.5)
correct – compared to the weight attached to Wearing apparel; dressing and
dyeing of fur (at 27.82).Textiles has a separate weight of 61.64 and should not
be including wearing apparel and dressing. In General, the weights need
thorough review – as this is the easiest to revise but most conduce to error.
(v) Who
initiates the Data communication process? Is the process reliable?
(vi)
How
many layers of data communication and compilation are involved before the final
compilation? In the context of Faster, direct means of communication /
compilation available now, can we not avail such, direct, faster, more reliable
means of communication and compilation?
(vii)
Who
interprets data – at each stage? Are there Industry bodies interpreting such
Data – and the purpose / conclusions of it?
(viii)
What
does CSO do after compilation?
(ix)
When
we look at the Data for Industrial Production in the US, we find that US
compiles Data under the head –
MAJOR
MARKET GROUPS (1) Final products (2) consumer goods (3) business equipment (4)
nonindustrial supplies (5) construction (6) materials and under the category of
MAJOR
INDUSTRY GROUPS (1) Manufacturing (2) Mining (3) Utilities. The US also gives
capacity utilization levels for each group and then, STAGE OF PROCESS (1) CRUDE
(2) PRIMARY & SEMI-FINISHED and (3)FINISHED
(x)
India
is a land of computer wizards. The CSO and Government must take full benefit of
this talent Pool to upgrade their statistical methods in all dimensions so that
they are of significant Benefit to all users of this data. We must also look at
what the Advanced Nations are doing on this aspect.
BAT FOR GROWTH
We
need to discuss the relevance of the November Data.
MINING : Mining is in the dumps. We all
know it. The various scams have done huge Damage. But, mines are a national
asset, licensed to certain industrial groups – for use. If they get involved in
scams, it is time for Government to nominate some of its own directors for
taking firm decisions on production and marketing front – and ensure that
mining production meets the country’s needs.
CAPITAL GOODS :
Capital Goods has registered a negative Growth. It is difficult for
entrepreneurs to go in for creation of capital assets when the cost of funds
needed for such capital machinery exceeds the returns on capital, or there is
thin margin between the two.
As
a rule - COC
must be significantly lower than ROC – otherwise, creation of
capital assets does not take place.
Also,
flight of
capital takes place – to places where ROC is higher.
This
is where, RBI’s raising of interest rates 13 times in one year – to the current
High levels comes into the Picture. Finance Ministry and Industry Groups must
now press RBI for reducing interest Rates to the level prevailing prior to this
one year.
The
Nation must now BAT FOR GROWTH.
If
Growth suffers for any reason – India will also go the way of the European
Nations. There is no way – the RBI can control Inflation through repo /
reverse-repo rate raising in India, if the State and Central Governments are
indulging in unproductive spending. Also, the amount of Black money and
counterfeit currency in the system and
money outside the Banking system – is too huge for Bank credit to make a dent
on Inflation.
Inflation,
in India, can only be a function of demand and supply of Products – and bank
credit will not be much in the picture. But, yes, by curtailing capital to the
producers, it can effectively curtain production and growth. When production
and growth are curtailed, while demand is intact, Inflation actually rises
higher, and, to my mind, this is what is happening in India.
In
my view, Inflation control rests with state and central Governments and Not
with RBI – as far as India is concerned.
But,
RBI can fuel Growth by lowering the COST OF CAPITAL – meaning, lowering of the interests
rates and making more capital available by lowering the CRR.
There
is also no point in Government infusing more and more capital into the Public
sector banks, if RBI is raising the CRR and keeping CRR at high levels.
Government funds will flow to PSBs and they will remain IDLE there!!
If
productivity suffers through Government spending, Productivity can also suffer
through NON-SPENDING in this manner.
If
India has to achieve higher rates o Growth, the Key lies partially with RBI. Interest
Rates must come down significantly and immediately and CRR also must come down.
Of
course, Government has to remove Major constraints on Growth – like the acquisition
of Land etc.
Let India BAT FOR GROWTH.
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