Macro The new-look index of industrial production (IIP) and the wholesale price index (WPI), which were declared on Friday and have been built on the new series of data, paint a much healthier picture of the Indian economy than the old series did.
However, deeper analysis shows that woes in manufacturing persist.
The base year for the indices in the new series has shifted to 2011-12, against the earlier 2004-05.
For instance, in none of the months in 2016-17 did the IIP contract in the new series, while it declined in six months — April, July, August, October, December, and February — in the old series.
The new series of the IIP shows higher growth rates in most months in the period April 2012 to March 2017 than was the case when the computation was done in accordance with the old series. This is attributable to the base shift, increase in the number of factories in the panel for the reporting data and excluding closed ones, and including new items and keeping out old ones.
Calculated in accordance with the new series, while the IIP rose 2.7% in March, against 1.9% in February, the WPI inflation rate declined to a four-month low of 3.85% in April, against 5.29% in the previous month.
The consumer price index (CPI), which had moved to the new series earlier, declined to a record 2.99% in April, against 3.81% in the previous month.
Even if one assumes that demonetisation did not have much impact in November 2016 as it would have come with a lag, in none of the four months from December to March did the IIP return to the level of November, when it had grown by 5.7%.
The same trend was found even in the old series, by which IIP growth in November was 5.6%, the highest in the post-demonetisation period.
However, the manufacturing growth rate declined to 1.2% in March, against 1.4% in the previous month. This is the lowest growth in the three-month period, but was higher than the 0.9% in December, which was the worst affected due to demonetisation.
Mining saw stupendous growth of 9.7% in March, against 4.6% in February, while electricity generation rose 6.2%, against 1.2% over this period.
Cumulatively, the IIP grew five% in 2016-17, against 3.4% in the previous year. But the old series shows growth to be dismal. It would have been 0.7% in 2016-17, against 2.5% in the previous year.
In the new series of the IIP, there are 809 items, against 620 in the old one. As many as 149 items such as steroids, cement clinkers, prefabricated concrete blocks, and refined palm oil have been added in the new series, while 124 items such as calculators, colour TV picture tubes, and gutka have been deleted.
The weight of manufacturing in the new IIP has increased to 77.6% from 75.5%, while that of mining reduced to 14.1% from 14.3%, and electricity to 7.9% from 10.3%.
In the new series of the WPI, the number of items covered has increased from 676 to 697. In all, 199 new items have been added and 146 old items have been dropped.
Among the primary articles, new vegetables and fruit such as radish, carrot, cucumber, bitter gourd, mosambi (sweet lime), pomegranate, jackfruit, and pear have been added. In the mineral group, items like copper concentrate, lead concentrate and garnet have been added whereas copper ore, gypsum, kaolin, dolomite, and magnesite have been taken out. Natural gas has been added as a new item.
Among manufacturing items, around 173 new items such as conveyer belt, rubber tread, steel cables, tissue paper, and wooden splint have been added, while 135 items like khandsari (unrefined raw white sugar), poppadom, and video CD players have been dropped.
The weight of manufactured items has decreased to 64.2% in the WPI in the new series from 64.9% in old series, and fuel and power to 13.1% from 14.9%, while those of primary items rose to 22.6% from 20.1%.