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High volatility in IIP raises questions on its credibility
Apr 2, 2014


IIP or Index of Industrial Production is an index that spells out the growth of various sectors in an economy. However, in recent periods the IIP index has lost its sanctity. For severe volatility in the number has reduced its credibility. The sharp swings and massive revisions have impaired the index. A glance at the chart below fairly corroborates this view. A leading financial daily reports IIP comparison of past five months of 2013-14. It clearly shows up the erratic movements in the index. The IIP for September 2013 stood at 2.7% and then fell into negative territory for three consecutive months. Then a new ray of hope emerged with improved industrial output. And the IIP rose to 0.1% during the month of January 2014. The positive index is a good sign. However the inaccuracies in the index calculation cannot be dismissed as a case of oversight. Inclusions of irrelevant items, infrequent data revisions and exclusion of important items have led to the discrepancies in the index. Alas it is high time! The authorities ought to take cognizance of this matter. No wonder, the Planning Commission has woken up to the need of the hour. It has sought for a complete overhaul of the index to rectify these inaccuracies. With a revamp plan in place, we certainly hope to get a clearer and accurate picture.

Data source: Business Standard

This Chart Of The Day was published in The 5 Minute WrapUp - Why RBI will continue to remain a hawk...

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