The aggregate IIP as per Quick Estimates from CSO was up 2.4 per cent in May, indicative of an improvement over 0.9 per cent decline in April, but a decay compared to 6.2 per cent expansion in May 2011. While manufacturing rose 2.5 per cent and electricity 5.9 per cent, mining IIP tanked 0.9 per cent, continuing the rot of April as also the fiscal 2011-12. Achieving an 8 per cent increase in May, over 3.8 per cent in April and 6.8 per cent in March, coal production has remained in the positive growth zone after steep declines during August-October last year. Domestic petroleum crude increased nominally in May, but the feat has come after decline in the preceding seven months. Growth has come from onshore production (mainly private/JV players), whereas offshore output has declined. Natural gas, however, continued to sink.
Twelve out of 22 industries at 2-digit NIC levels showed positive growth in May, where as 10 declined on month-over-month basis. Going by use-based classification, capital goods index dropped 7.7 per cent in May, on the top of 19.6 per cent decline in the preceding month and around 4 per cent in the fiscal 2011-12. Basic goods IIP was up by 4.1 per cent in May, intermediate goods 2.7 per cent and consumer goods 4.3 per cent (driven by 9.3 per cent in consumer durables).Tentative nature of IIP numbers
By the way, the Quick Estimates of IIP have remained highly tentative even under the New Series with 2004-05 as the base year. After the New Series data was released in June 2011, all the first thirteen months covering April-April 2011-12 have witnessed the provisional indices undergoing revisions subsequently. The overall IIP was found lower under first/second revisions in four months, compared to earlier “quick” estimates, and higher in nine months. The sharpest upward revision was in December last which resulted in month-over-month growth rate pushed up from 1.8 per cent to 2.7 per cent; and the steepest downward revision in index number was incidentally in the following month which meant annual growth of 1 per cent, against 6.8 per cent put out earlier, following correction of wrongly recorded sugar production in January’s Quick Estimates. Further, aggregate IIP in April 2012 has yielded 0.9 per cent decline under first revision, against 0.1 per cent increase provisionally estimated earlier. The average growth in aggregate IIP works out to 2.3 per cent over FY12, around one percentage point lower than that based on quick estimates.
The revisions under capital goods index are more pronounced. Thus, six out of first 13 months have seen downward revisions in index numbers and hence the growth rates, whereas seven have witnessed upward revisions. The IIP for capital goods in April 2011, the first month after the New IIP was released, turned out to be 6.6 per cent higher after revision, half of 14.5 per cent given out earlier. Average decline of 4 per cent in capital goods index for FY12 is over two percentage points deeper than that based on provisional index numbers.
The revisions reflect those at subgroup levels, and obviously at individual industry levels, the revisions are likely to be sharper and more widespread. Going by some quick calculations, we have observed that growth rates of 120 industries, out of 268 DIPP-monitored industries had undergone changes in March 2012 in terms of first revisions reflected in the IIP numbers for the subsequent month. Generally, the quick estimates of IIP undergo first revision in the next month and the second/final revision in third month factoring the updated data received from the source agencies.
The quick estimates lose their value for policy purpose if revisions are volatile, widespread and frequent. While provisional nature of IIP numbers could be inescapable in the interest of quicker release of these important statistics, it is also essential to lessen the phenomenon of such widespread and sharper revisions through streamlining of data collection and processing machinery.
"TENTATIVE" IIP (% GROWTH)