The euphoria over the 13.8 per cent jump in industrial output in July, which was more than double that of June which was 5.8 per cent, was soon laced with scepticism. Economists and analysts felt there was something wrong with the figure as capital goods had jumped 63 per cent. Analysts had predicted a growth of seven to eight per cent in the Index of Industrial Production (IIP) and so were taken by surprise that they were so off the mark. It was the figure of capital goods, which rose 63 per cent, that gave rise to doubts about the veracity of the overall figure. The overall manufacturing growth figure was 15 per cent, and within this the capital goods output was 63 per cent. Manufacturing has the heaviest weightage in the IIP. Even Planning Commission deputy chairman Montek Singh Ahluwalia said the figures were better than he had expected. The Union finance minister was more optimistic and said this was a good sign as it means more employment. The manufacturing sector is one of the largest employment generators. As far as employment is concerned, it would be a good thing if the government came out with figures that indicate how much employment is created in the organised sector. The US comes out with these figures regularly and there is no reason why India cannot do this. This would surely be a good indicator of the real growth in the economy.
It must be remembered that 13.8 per cent is a provisional figure and could be revised downwards. The June IIP growth figures were revised downwards from 7.1 per cent to 5.8 per cent. The chief statistician has explained this as being due to the lag effect. One has to remember that India is a vast country and getting industry to respond with facts and figures is not the easiest thing in the world.?The response rate is said to be between 25 and 60 per cent.
In the case of the scepticism expressed by the economists and analysts, it could be a case of once bitten, twice shy. Earlier there were some discrepancies in a sub-section of the GDP figures, or the demand side indicators, which led to a lot of embarrassment and comment. There is a fear that has been expressed that the world may not believe our statistics, as in the case of China. Chinese statistics are not considered totally reliable and Indian statistics, which have till now been taken as extremely reliable, will take a knocking if more discrepancies are found.?But, having said this, it is also a fact that analysts and economists have mostly remained behind the curve when it comes to predicting trends in the economy. They don’t seem to accept sharp trends when they are going upwards or downwards.
There is expectation that the figures for July, particularly for capital goods, will be revised downwards. If this figure is removed, the picture of the IIP is not as robust as being currently painted. Besides, the analysts who express doubt about the manufacturing and capital goods figures argue that the credit offtakes from the banks don’t indicate that production has grown so steeply. The figures for electricity, too, are lower. In fact, the data for non-consumer durables and the core sector are not very encouraging and are a source of concern. But, as some economists say, even if the figure is revised downwards the IIP will still be a high single digit, like nine per cent-plus. The main thing is that the overall trend in the IIP is positive and indicates that economic recovery is underway.