Overall, industrial production grew by 1% yoy during the full year as compared to a growth of 2.9% yoy a year before. Within this, manufacturing grew by 1.2% yoy during the year as compared to 3% yoy growth recorded a year before.
However, while the performance of the index over the last three months does lend credence to the belief that the worst may be over for the economy, the sense of comfort vanishes as one takes a closer look at the data. For starters, the February Index was revised downward (though at the margin) from 0.57% yoy to 0.46% yoy. In fact, during six out of the past eleven months, the index was revised downward when we moved from preliminary to final data. More importantly, the quality of data continues to remain suspect. When one considers the disaggregated data at the two-digit level, a major distortion is visible in the category ‘wearing apparel; dressing and dyeing of fur’. The index value for this segment dropped to 68.4 in March 2012 from 154.2 in February 2012 and then jumped back to 124.2 by April 2012. Clearly, a major base effect came into play here during March 2013 as a result of which, production for this category jumped by 152.3% yoy in March, thereby pulling up the index considerably. In fact, despite having a weight of only 2.78% in the IP, this segment contributed as much as 2.9 points to the overall index on an annual basis, while the IIP in itself increased by only 4.7 points over the same period.
Like most other categories, manufacturing of this product also exhibits high degree of volatility. If we extrapolate the average growth rate in production of this segment for the first eleven months (April till February) to March, it would have grown by only 3.3% and not 153% as is the situation currently. Had that been the case, overall IP would have increased by only 0.99% yoy in March and not 2.51% yoy as the official data suggests.