Under normal circumstances, you could dismiss the India Inc data—indeed, on various occasions, that is precisely what the official system has done when confronted with the private sector data. The problem, however, is that there have been so many bloopers in the IIP data, only a brave man would set store by it. In January, the statistics ministry issued a press release saying it had entered an incorrect number for sugar production which saw the IIP rise to 6.8% instead of the actual 1.1%. Some months before that, brokerage house Centrum pointed out the July 2011 IIP surge was caused by an impossible 517% hike in insulated cables and wires—remove these, and the capital goods growth was just 0.3% in that month instead of the 63% reported. Even for the June 2012 IIP data, while the publishing and printing sub-index growth is now down to a reasonable 15%, it was a near-impossible 56% in the January data.
While reconciling IIP and India Inc’s financial data is easier said than done, it is evident a more permanent solution to the official data system is called for. Forget private sector individuals, if even RBI is constrained to comment on how unreliable the IIP is, there’s clearly a problem. A huge one, since its policies depend upon it. A negative June IIP suggests a rate cut immediately, but if you remove the volatile and unreliable capital goods part of it, the June IIP of 3.4% isn’t half as bad. Even Vijay Kumar, or Gagan Narang, would have a problem hitting a target they couldn’t see.