It's difficult to decide whether to laugh or to cry.
February's Index of Industrial Production (IIP) came in at a lower-than-expected 4.1 percent compared with expectations of over 6 percent. But that's not the shocker. The shocker is that the government hacked the IIP for January to 1.1 percent from 6.8 percent earlier.
What the hell is going on? It's like a comedy of errors here. After bungling on exports data, it looks like the government is botching up industrial production figures as well.
A revision of a few basis points or even 1 percentage point ( 100 basis points) is understandable, but it's difficult to swallow the idea that the government's data compilers overshot the correct estimate by a whole 5.7 percentage points.
In this case, the government is laying the blame squarely on the Directorate of Sugar, which, it claims, provided inaccurate data."...the sugar production was wrongly taken as 134.08 lakh tonnes in place of actual figure of 58.09 lakh tonnes. This wrong figure was taken because of incorrect reporting by the Directorate of Sugar in the Ministry of Consumer Affairs, Food and Public Distribution. Immediately after detection of the error, the revised IIP numbers and growth rates for the month of January, 2012 have been compiled," the government said in a press release.
Apart from the fact that a change in just one commodity - sugar - seems to have a really disproportionate impact on the IIP, the question remains: how do we trust what the government is saying this time around?
While the government was quick to admit its mistake, it's still a mystery how it -- and the sugar directorate -- managed to get the sugar output figure so widely off the mark (57 percent down from the earlier estimate)?
India's chief statistician, TCA Anant, tried to soothe any concerns by promising to "undertake a review of the IIP series," according to an NDTV Profit report."The January revision is because this was a 'one off' error... principally the error was on account of sugar," he said.Unfortunately, it's difficult to believe this was a one-off. This CNBC TV18 report suggests that a pile of corrections may be in the offing on IIP data for October, November and December.
In the television interview, Anant adds more fat to the fire by saying that market watchers should ignore details of individual components making up the IIP, especially if they can't be explained. "IIP indices are not meant to look at item level details," he said. "These things at an individual industry level can happen. It is very hard to explain what the reason behind it is, but these do happen.So we do not advise people to use the IIP as guides at the product level."
Fine. But when individual items collectively add up to make the IIP , doesn't that undermine the credibility of the IIP as well?
Maybe we should be thankful for small mercies. Like the fact that the IIP data was revised after a month of spotting the error.It took the Commerce Ministry a full seven months to admit it made a mistake in calculating its data on exports last year. (In December, Commerce Secretary Rahul Khullar announced a $9.4 billion 'correction' in the exports data for April-October 2011 due to a computer crash and data entry errors.)
Already, the government has been proved wrong several times over while making various estimates for the financial year ending March 2012. It was wrong on virtually every forecast from GDP growth and inflation to fiscal deficit and the tax take.
Now, it seems even past data are not immune to government goof-ups. It seems the current government is not only incapable of estimating figures for the future, it is incapable of capturing past data accurately as well.
If it weren't so serious, we would be laughing at the government's lackadaisical way of computing data.
Updated Date: Dec 20, 2014 09:39 AM