Figures of overall growth for the last financial year are some weeks away; but meanwhile, the Central Statistical Office (CSO) has published the February figures of industrial growth. They continue to be unmistakably modest. For the 11 months ending in February, industrial growth was a mere 2.6 per cent - a figure that may look normal in some ailing European country, but stands out as uncharacteristically low for our country, which only a few years ago was clocking figures around 10 per cent. Capital investment in the same period was 1.4 per cent below the previous year, which points to a deficiency of hope amongst entrepreneurs who invest for the future. The growth figures of 3.6 per cent for basic goods and 2.6 per cent for intermediate goods are well in line with the general loss of vigour.
The only sector that shows outstanding growth of 11.4 per cent is consumer durables; but this is due to base effect, for the figure for the previous year was a decline of 13.3 per cent. The reason is well known. Last year was bad for vehicle sales; they have recovered this year. But on the whole, vehicle output has not grown in two years. What is striking is that the output of consumer non-durables, which normally does not show much volatility, is down 1.5 per cent.
Agricultural years are taken to run from April to March. Last year (2014/15) saw good rains in northern India. So there was a bumper sugarcane crop; the Uttar Pradesh government forced sugar mills to buy it. This year (2015/16) rains have failed, so the sugarcane crop will fall drastically. Sugar output from October 2015 till now is 8 per cent below last year; the annual crop will fall even more.
These figures are completely inconsistent with national income figures of industrial growth, which were 7.3, 9.0 and 12.6 per cent for the last three quarters of 2015. It is not unusual for Index of Industrial Production (IIP) to move out of step with industrial GDP, for the sources for the two are very different. Both the series may be wrong; but irrespective of imperfections of measurement, there is always one figure that is right, and all estimates are attempts to get as close as possible to the right figure. If the two sources give such widely divergent figures, one must be distinctly more wrong; it is time the CSO discarded it. It has long indicated that it was the Census of Manufacturing Industries (CMI) that is less accurate; they do not cover small industry adequately, and the covered firms are lax about sending in figures. If that is so, it is time the CSO discontinued the CMI or whipped the covered firms to give the figures in time.
Recently, the CSO has announced a shift to the MCA-21 database of the Ministry of Corporate Affairs. It always issued painstaking explanations whenever it changed its sources or methods; this is the first time it has not done so. That is a serious lapse, because it is not clear at all that a corporate database is a good source of data on production - or, as the CSO prefers to call it now, on gross value added. For one thing, a large proportion of Indian productive sector is unincorporated, and hence not covered by a corporate database. For another, what matters for macroeconomic estimates is estimates at constant prices. Corporate figures are at current prices, and do not readily yield constant-price estimates. Calculating a deflator for them presents daunting problems; it is not even clear that the CSO has confronted them. It is time the government appointed a committee of experts to look into national income estimation and reform of the CSO.