Manufacturing manna

Let us pick two bits of information. First, Q1 real GDP growth estimates for 2006-07, which show GDP growth of 8.9 per cent on last year’s corresponding quarter. We will have Q2 estimates on November 30. The service sector has been chugging along, while agriculture and allied activities and mining and quarrying have been lagging behind. Electricity, gas and water supply have not done too well either. What has driven growth in Q1 is manufacturing, growing at 11.3 per cent.

Second, we have quick estimates of the index of industrial production (IIP) for September 2006. The October figures will be available in December. September 2006 on September 2005, IIP shows an increase of 11.4 per cent. And April to September 2006, IIP shows an increase of 10.9 per cent over a comparable period in 2005. Now let us get some pedantic stuff out of the way. Industry is not manufacturing. Other than manufacturing, industry includes mining and quarrying, electricity, gas and water supply and construction.

For instance, in IIP, manufacturing accounts for 79.36 per cent of the weight. Within the IIP growth of 11.4 per cent, it is manufacturing that has done well. September 2006 on September 2005, manufacturing grew at 12 per cent and for April to September 2006, manufacturing grew at 12.1 per cent. One can disaggregate this manufacturing growth further, in which case, one finds that everything except capital goods has been growing fast. And disaggregated differently, everything other than jute and vegetable fibres and “other manufacturing” (a residual category) has done well. The impressive growth is broad-based and hence the question, Are we witnessing a manufacturing revival?

Let’s be pedantic once again and quibble about data. Manufacturing has registered and unregistered categories. For registered manufacturing, annual data are collected through the Annual Survey of Industries (ASI) and this is part sample (survey) and part census. Data on unregistered manufacturing surface once every five years, through a survey. Plus there are SSI (small-scale industry) and IIP sources. In August 2001, the National Statistical Commission submitted a devastating critique of India’s statistical system and all four sources of manufacturing data — ASI, unregistered manufacturing, SSI censuses and IIP were hauled over the coals. There are time-lags and sampling and non-sampling errors. Units that shouldn’t be included (they have closed down) are included. Units that should be included are excluded. Different databases of unregistered (census or survey) manufacturing vary widely. Perhaps understandable, because differing concepts and definitions are used. This is compounded by the lack of adequate data on SSI and unorganised traditional industries. Finally, other than the problem that the IIP represents only 80 per cent of manufacturing, there are problems associated with low response rates, small samples, unsatisfactory weights and non-representation of the unorganised sector. As a generalisation, manufacturing data are therefore somewhat satisfactory for registered manufacturing and extremely unsatisfactory for everything else. But having said this, one doesn’t get the sense that this manufacturing growth is in the realm of lies, damned lies and statistics.

... contd.

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