Fixing the IIP PDF Print E-mail
Monday, 23 April 2012 00:08
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Why not get data from the taxman to validate it?
It was sugar production in January 2012, it was insulated cables and wires in October 2011—while the former resulted in IIP growth being revised downwards from 6.8% to 1.1%, the latter saw the growth in capital goods fall from 63% to just 0.3%. Our top column (Shooting in the dark) suggests even larger data errors have taken place in the past, in one case nearly halving IIP growth for the year when a new base-year was introduced. In October 2011, to add to this saga of woes, Kotak Securities found the official exports data didn’t square up with data for firms in the BSE 500—later, the government reduced the export numbers by $9 billion.
Obviously, India’s statistical gurus will have to put their head together to find a solution to the problem, but why not use the one data source that everyone gives data to—the taxman? In the days of the license raj, companies furnished data to each line department and ministry, but with a dwindling of their powers, the regularity and vigour of such data-reporting has fallen considerably. In the case of the taxman, however, data has to be given regularly, by law. To be sure, there are a lot of firms that don’t have to give data to the taxman, but the larger firms all have to submit data—going by the 80/20 rule, the top 20% firms in any industry are probably responsible for 80% of the output. Once the taxman’s data is made available to the statistical department, a more exact mapping can be done. It is not a substitute for collection of data by the statistical system, but it is an important validation tool. And not just for IIP data—let’s not forget the audit into telecom companies was ordered after Kotak Securities found one telco was reporting one set of figures to the telecom regulator (for calculating the license fees) and a higher set of figures to its shareholders.

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