With some product additions and deletions, reset to come two years ahead of schedule

The government is looking to bring out a new series for two key macroeconomic indicators — the Index of Industrial Production (IIP) and the Consumer Price Index (CPI) — in 2020, almost two years ahead of schedule. Both IIP and CPI are released on the 12th of every month. The new series of the IIP will have a base year of 2017-18, while for the CPI, it will be 2019. “There will be some additions and deletions, but the total number of product categories is likely to remain the same,” a senior government. For a new product to be added to the IIP, it should meet at least three criteria — market presence for some time, 5-7 units producing the product, and supplies of the product being in the market for some time to come.

Time lag

The IIP data comes with a month’s lag, but there is no such lag with the CPI. Although both the indicators are key for fiscal and monetary development, the CPI has assumed greater significance, as it is used as the base for policy rate revision by the Monetary Policy Committee, and also as deflators in the National Accounts. Both indices are prepared and released by the Central Statistics Office, which operates under the Ministry of Statistics and Programme Implementation. The IIP is revised periodically to capture the changes in the structure and composition of the industry over time due to technological changes, economic reforms and consumption patterns. When the index was commenced in India, the base year adopted was 1937. This was revised successively to 1946, 1951, 1956, 1960, 1970, 1980-81, 1993-94, 2004-05 and 2011-12. The latest change was made effective in 2017.

The previous revision in the IIP adopted the National Industrial Classification (NIC) 2008, replacing NIC 2004. It saw an increase in the number of item groups to 407 from 399. Also, 149 new or emerging items were added, while outdated/obsolete ones from the old series were dropped. Also, weights were rationalised to better reflect the actual value addition of each sector, incorporating the effects of subsidies.

Realistic picture

The new series has a mining group with 29 items and total weight of 14.37. Manufacturing has the highest number of items (809) and maximum weight (77.63).

The government official said data from the new Consumption Expenditure Survey, likely to be released at the end of this month, will also help in revising the item basket and weighing diagram for the CPI. The new survey has data till March 2019.

This means the Price Reference Year and the Weight Reference Year will be the same — 2019 — thus giving a more realistic picture of the price situation. There was a six-year gap when the base year was 2010, which was brought down to six months when the base year was fixed at 2012. The last revision in the CPI was made effective from January 2015. The CPI is based on the prices collected from 1,114 markets in 310 towns and from 1,181 villages.