Friday, January 13, 2012


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)


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).



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.



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.


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.


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