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How Modi government is fudging IIP growth with help from statisticians

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Kamal Mitra Chenoy
Kamal Mitra ChenoyMay 15, 2017 | 16:14

How Modi government is fudging IIP growth with help from statisticians

The most important way of "producing" economic growth is to tweak the statistics. The new chief statistician of the Central Statistical Organisation (CSO) TCA Anant has changed the base year in the Index of Industrial Production (IIP), which produces figures more favourable to the NDA.

While choosing the basket of items for the 2011-12 base-year index, as many as 42 item groups have been deleted from the earlier 2004-05 base year index. This was much more than the 22 item groups (including offshore platforms, typewriters, sewing machines, tape recorders, etc.) which were dropped while framing the 2004-05 base-year index.

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Presumably, the performance of the dropped items was poor and their exclusion has reduced the adverse impact on the overall industrial output performance.

In other words, statisticians can "tweak" industrial output figures by including top performers or dropping poor performers.

Similarly, within the manufacturing sector, the extent of deletion and inclusion of items (not item groups) has been larger. As many as 124 items have been excluded from the manufacturing sector, and the CSO has added as many as 313 new items.

As (The Sunday Business Standard, May 14, 2017, p12) put it: "No wonder the base in the manufacturing sector has expanded, giving a fillip to the growth numbers."

So careful selection/rejection can change IIP figures, particularly since the new number of items in the manufacturing sector appears to be decisive.

The weight of the manufacturing sector in the IIP has now been raised to 77.63 per cent, compared to 75.5 per cent in the 2004-05 series. This too would have helped improve the new base-year series. But have these figures had any impact on the demonetisation of 86 per cent of India's currency on November 8, 2016?

Under the 2004-05 series, for industrial output in the April-October 2016 period, a decline in output of 0.3 per cent is visible. In the post-demonetisation period of November 2016-March 2017, industrial output picked up marginally to record growth of a little over 2 per cent.

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British statesman Lord Disraeli was supposed to have said, "There are lies, damn lies and statistics!" Photo: India Today

But industrial output during April-October 2016 under the 2011-12 series shows growth of 6.3 per cent and decelerates to only 3.3 per cent in the five months between November 2015 and March 2017.

A comparison between the IIP percentage growth rates shows the striking difference in calculation results via the old series (2004-05 base year) and the new series (2011-12 base year). Under the new base year, the NDA grew by 4 per cent in 2014-15; 3.4 per cent in 2015-16; and 5.0 per cent in 2016-17.

But the results are quite different if the old base year of 2004-05 is taken into account. In 2014-15, the NDA grew by 2.8 per cent; in 2015-16, NDA growth fell to 2.4 per cent; and in 2016-17 NDA growth plummeted to 0.7 per cent. These figures clearly indicate a sharp drop in industrial growth in the post-demonetisation period, contrary to official claims.

Statistics have been tweaked before under earlier regimes too. But now it is blatant. Shouldn't there be detailed scrutiny by independent experts as a double check?

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Or will the misuse of statistics for political ends be allowed to continue? As the famous British statesman Lord Disraeli was supposed to have said, "There are lies, damn lies and statistics!"

Last updated: May 15, 2017 | 16:14
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