Why was there an error in stating Q1 GDP?

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Q: Not just the GDP but the bigger question that economists have about Indian statistic is the IIP data. The IIP data appears to be severely backdated can you tell me how many people you send forms too and how many people respond. Do you send out forms to what 1,000 companies and do 500 at least respond? Can you just tell us how the IIP is constructed and filled in?

Das: For IIP we are the compiling agency. We do not collect data directly from the companies. We have got 18 different source agencies. Like we have the Ministry of industry that we call the Department of Industrial Policy Promotion. We get from Ministry of Steel. So from different departments we get the data. Our largest supplier is DIPP. Under Industrial Development and Regulation Act they get the data directly from the companies.

Q: I am asking you this because even now in the IIP index you have items like tape recorders and typewriters which no one ever uses. So I want to know how many columns do you have, how many entries do you have in the IIP and how much of it is actually updated?

Das: The updation of the item of basket that you are talking about this is done when we do the revision of the base year. The current base is 93-94 and 93-94 the use of items that you mentioned is quite relevant. But in the field of information technology and telecommunication things are changing so fast that now tape recorder has become absolutely irrelevant.

So we have revised our base to 2004-2005 we have almost finalized it. We are waiting for the final approval from the appropriate authority. Then we will be bringing out the 2004-2005 as the base and in which you will find most of the items which were there in 93-94 will not figure in 2004-2005. The only solution to bring out a reliable IIP is to make a frequent revision. As per the UN recommendation it should be done once in five years.

Q: Now this is already 15 years?

Das: In India we do it every 10 years.

Q: It is 15 years now, but when will the new IIP index be available to us you think?

Das: We have already prepared the note and we are waiting for the approval of the Cabinet. We have already made the note and sent a proposal to the committee of secretaries and then to it goes to the Cabinet. So we are expecting it will be done very soon.

Q: One would think that the GDP is a little better off but the IIP that has not been updated for the last 15 years is an even poorer indicator of where the economy is headed. Your thoughts on the other data put out by the National Accounts? 

Shah: I think we have very big problems. I was hearing your exchange with the Director General just now and I think the word computerization is not being understood. Using a computer as a calculator is the most pointless thing in the world. As you said things have got to be done by a computer programme, it has got to be an end to end completely automated system with a well defined process manual which is in the public domain so that you have 100% consistency and these kinds of errors do not happen.

The larger point that I would like to make is that what you measure is what you can manage. I think it is a real mistake on our part, that we are a USD 1.2 trillion GDP and we have a statistical system that is straight out of the 1970s. I think it is a mistake to try to run a modern sophisticated economy with such shabby statistical foundations.

Q: Any last thoughts that you would want to say?

Das: I would only request Dr Shah to visit CSO and he can see for himself the amount of modernization that has been done in the office.