BENGALURU : The government is likely to change the base year for calculating the Index of Industrial Production (IIP) and the Wholesale Price Index (WPI) to 2011-12. Currently, IIP and WPI take 2004-05 as base year, while the GDP and Consumer Price Index data are calculated using the base year of 2011-12. Using the same base year of 2011-12 for all macroeconomic data indicators will ensure that accuracy is maintained in the mapping of economic activity.
IIP is the level of economic activity in different sectors such as manufacturing, mining and power, giving a broad outlook on the output of various types of goods like basic, consumer and capital goods. It helps gauge economic progress and investments in the economy. WPI denotes the rise in profitability of the industries.
The Central Statistics Office (CSO) has already changed the base year of India’s national accounts including the GDP and the gross value addition, to 2011-12.
“When we say end of April, it is February data because there is a one-and-a-half month gap (lag). Data for the months up to February will come (in April-end). Then, we’ll stick to the 12th day of every month from May onwards. The first release will be April end... with that target, we are proceeding,” CSO director-general G C Manna said.
“Already, the committee of secretaries headed by the Cabinet Secretary had a meeting. It was decided that a small group comprising secretaries of statistics and industries headed by the Cabinet Secretary will take a final decision. This meeting will be held on March 14, 2017,” he said.
He added that economists and think tanks have been asking for anew time series of IIP and WPI to give more accuracy to the GDP data and make it more realistic.
“The decision to release the WPI and IIP series with an updated base is a positive as it will now be in sync with the all-important GDP data. The new base year is also likely to capture the price and production trends more accurately,” said Rishi Shah, economist, Deloitte India.
He explained that real prices are set for a particular year and production is multiplied by that number to get the final value of production. The idea is that the number also has to change because products like Iphones were not even introduced in 2004-05.
“Regularly changing base years will ensure that the IIP captures the current industrial composition in a more comprehensive manner, including more modern goods and leaving out ones that are not being produced. This gives accurate signals of industrial growth,” said Bornali Bhandari, fellow, National Council of Applied Economic Research.