Focussing the macro-economic indicators in both Index of Industrial Production (IIP) and Wholesale Price Index (WPI), the Government on Friday launched the new series of WPI and IIP with new base year of 2011-12, a move which is aimed at capturing the structural changes in the country's economy.
The new series of Government data showed that IIP rose 2.7 per cent in March as against 1.9 per cent in February, while WPI inflation declined to a four-month low of 3.85 per cent in April as compared to 5.29 per cent in the previous month. However, inflation on the Consumer Price Index or CPI, which has already been revised to a new series, declined to 2.99 per cent in April as against 3.81 per cent in the previous month.
Explaining the rationale behind the revisions, the Government said that it is a regular exercise for periodical reviews and revisions of the base year of the macroeconomic indicators and is aimed at capturing the structural changes in the economy and improving the quality, coverage and representativeness of the indices.
“Aiming at capturing the structural changes in the economy and improving the quality, coverage and representativeness of the indices, the Government always does this regular exercise for periodical reviews and revisions of the base year of the macroeconomic indicators,” Statistics Secretary TCA Anant said, while unveiling new series of WPI and IIP indices based on the revised base year of 2011-12 at an event here.
When asked about any impact of these new series of indices on Goods and Services Tax (GST) which is scheduled to be rolled out on July 1 this year, Anant, however, said, “With the new revised indices, there may be some impact on retail and wholesale inflation numbers, post rollout GST. Since GST will be captured on final point of sale, the effect of GST will be captured through CPI.”
However, DIPP Secretary Ramesh Abhishek said that the new series does not include indirect taxes in order to remove the impact of fiscal policy. Explaining he said, “The change is in consonance with international practices and will make the new WPI conceptually closer to Producer's Price Index (PPI). A shift towards PPI may result in inclusion of services in the index, unlike the current scenario, where services are excluded.”
When inquired about the services whether included in the new series, Abhishek added, “DIPP is working on a separate index for services, which is likely to be released in the next few months.”
The new series, launched just before a couple of month of GST roll-out, saw the base year in the two indices shifted to 2011-12 as against earlier 2004-05 to bring them in parity with other macroeconomic numbers such as the consumer price index and the gross domestic product (GDP).
In the new series of IIP, items like gutka, calculators and colour TV picture tubes have been removed with 2011-12 as base year, while steroids and refined palm oil are among those that have found place in it. The total number of items in the index has increased to 809 as compared to 620 earlier.
Similarly, As many as 199 new items, including natural gas, tissue paper, conveyer belt, rubber tread, steel cables, pointed gourd, cucumber, bitter gourd and jack fruit, are included in the new series of WPI to make the inflation data more broad-based. While 146 items, including Coke (Coal), papad, video CD player, khandsari and light diesel oil, were dropped under the new series.
The new series of IIP showed higher growth rates in most months in the period April 2012 to March 2017, as compared to the existing series. This is attributable to shifting of base to a more recent period; increase in number of factories in panel for reporting data and exclusion of closed ones and inclusion of new items and exclusion of old ones.
As per the IIP data based showed on the revised base year of 2011-12, the growth in industrial output, however, cooled to 2.7 per cent in March, chiefly because of poor performance of the manufacturing sector. The IIP growth was 5.5 per cent in March 2016, while for 2016-17, factory output grew by 5 per cent as against 3.4 per cent in the year-ago period.
On the other hand, IIP growth based on the old series (2004-05 base year) was 2.5 per cent in March compared to 0.3 per cent a year ago. Similarly, the figure for 2016-17 was 0.7 per cent as against 2.4 per cent in the previous fiscal.
As per the data based on the new base year, the manufacturing sector output slowed to 1.2 per cent in March, from 5 per cent in the same month of the previous fiscal. Electricity generation too slowed to 6.2 per cent, from 11.9 per cent in March 2016.
The mining sector, however, expanded by 9.7 per cent in March 2017 compared to a growth of 4.7 per cent in the year- ago month.
“The new series shows higher growth rates in most months during April 2012 and March 2017 compared to the existing one (2004-05). This is attributable to shifting of base to a more recent period, increase in number of factories in panel for reporting data, exclusion of closed ones and inclusion of new items and exclusion of old ones,” the CSO data said.
As far WPI is concerned, it slipped to a four-month low of 3.85 per cent in April as both food articles and manufactured items showed cooling in prices. The index basket of the new series has a total of 697 items, including 117 for primary articles, 16 for fuel and power and 564 for manufactured products.
The new WPI inflation readings, reflecting the annual rate of price rise, as per the new base stood at 5.29 per cent in March, 5.51 per cent in February, 4.26 per cent in January, 2.10 per cent in December and 1.82 per cent in November