Asks govt to consider alternative measure based on corporate sales and purchasing managers? index
Irked by the dismal industrial production data in recent months, the PMEAC on Friday asked the government to consider an alternative measure based on corporate sales and purchasing managers? index to get a better sense of the actual performance of the manufacturing sector.
While projecting manufacturing expansion at 5.3% and economic growth at 6.7% during 2012-13, the PMEAC said the IIP may pick up from the July-September quarter due to the base effect, and after the recent steps taken by the government to revive investment start showing results.
The council?s report began with a critique of the Central Statistics Organisation (CSO), saying it has revised the growth rate for 2011-12 at 6.5%, which is much below the council’s July 2011 estimate of, 8.2%. ?The council has reservations about the CSO’s preliminary estimates for 2011-12, particularly that for the fourth quarter,? it said. Disagreeing with the declining trend in IIP as put out by CSO, the panel, headed by C Rangarajan, said: ?The situation is somewhat better than the perception.?
FE reported on Thursday the CSO’s industrial output data was not showing the real picture with IIP falling 0.1% during April-June even though sales of the top 2,202 companies, excluding oil and financial firms, grew 13.66%.
?The resolution may be found if indeed manufacturing output (and GDP) was actually growing somewhat close to what is suggested by the company results than by the IIP,” PMEAC said in its economic outlook for 2012-13.
?The extent to which the IIP under- or over-measures manufacturing activity has become particularly acute of late in 2011-12,? it said.
IIP is derived from a combination of sample data on fixed frame basis and aggregate industrial data. While computing GDP, the government also conducts an annual survey of industries (ASI), which is a much more comprehensive measure. PMEAC said the mismatch between IIP and ASI in recent years has made the implications somewhat troubling and, hence, requires a relook.
In contrast to IIP, the corporate sales data adjusted for inflation show a closer proximity to the ASI data on manufacturing. ?This would suggest that it is possible to look at the rates of growth drawn from the company financial results data for 2011-12 to get a sense of an alternate metric of real growth in manufacturing,” PMEAC said. ?Preliminary assessments suggest that the net sales of manufacturing companies after price deflation was for all quarters of 2011-12 significantly higher than that estimated by the IIP,? it said.
