|Friday, 13 April 2012 00:13|
That should be the standard disclaimer for official data
During the compilation of the IIP for January, 2012, the ministry of statistics press statement yesterday read, “the sugar production was wrongly taken as 134.08 lakh tonnes in place of actual figure of 58.09 lakh tonnes”. That’s it, there’s no other explanation for how such a glaring error could be allowed to go unnoticed—the more than doubling of sugar production is what led to consumer non-durables growth to shoot up to 42.1% instead of 11% and overall IIP growth for January to 6.8% versus the corrected 1.1%. Sure, chief statistician TCA Anant said the incorrect reporting had taken place at the conumer ministry’s end, but surely the most basic of filters should have picked up such a huge change—indeed the ministry should have wanted to tom-tom the dramatic surge in sugar production as an achievement of the government! If this was the only instance of getting it awfully wrong, it would be ok, but over the years, the IIP has become one big joke. Thursday’s clarification, by the way, still doesn’t deal with the inexplicable 56.1% hike in publishing/printing and the 30% hike in medical equipment. In November, similarly, these two items grew dramatically—69.1% and 41.8%, respectively. And in October 2011, brokerage house Centrum put out data showing the July IIP surge was caused by a 517% hike in insulated cables and wires—Centrum removed these two items and found capital goods rose just 0.3% in the month and not the 63% reported. Indeed, many brokerages remove capital goods data while looking at IIP; after Thursday, they will remove consumer goods as well. Not surprising then, that at the Annual Statistics Day last year, RBI Governor Subbarao raised serious doubts about IIP data.
Shockingly, the problems aren’t restricted to the IIP, even in its new avatar. In October, Kotak Securities pointed to a huge discrepancy in exports data—while engineering exports supposedly rose from $38 bn to $68 bn, Kotak found exports of engineering companies in the BSE 500 rose just 11% in rupee terms. Later, FE found, just a third of the increase was to the top-10 markets for India’s engineering exports! While the official explanation was that Kotak hadn’t captured the dynamic SME sector, two months after this, the commerce secretary announced this was due to, you guessed it, a data glitch. Except, the $9.4 bn error he spoke of was after aggregating the overstatements and the understatements—just adding up the $15 bn overstatement of engineering exports and the understatement of $12 bn on petroleum and gems & jewelery (there were many more) adds ups to a $27 bn error. Even more damning was the goof up in GDP growth in Q1FY11—while GDP at factor cost rose 8.8%, that in market prices rose just 3.7%. Turned out, the deflators used were incorrect, and the actual growth in market prices was 10.2%!
How RBI is expected to take a call on rate cuts based on this data is anybody’s guess, though for what it’s worth, IIP growth halving from 8.1% in April-February FY11 to 3.5% in April-February FY12 suggests things are dramatically slowing—both capital and intermediate goods have contracted, by 1.8% and 0.9% respectively. While RBI will probably fall back on data it generates itself—credit growth—perhaps India’s official statistics can carry the warning the receipts of all shops have at the bottom, in fine print: E&OE. In that case, it stands for Errors and Omissions Excepted, in the case of the official data it would mean Errors and Omissions Expected