New Delhi: India’s industrial production contracted by 2.4 per cent in July due to poor show by manufacturing sector and capital goods. This is the worst performance in industrial production in last eight months. However, in a contrasting signal, the government’s net indirect tax collections in the April-August period grew by 27.5 per cent hinting at improving financial health of the corporate sector. The indirect tax collection stands at Rs 3.36 lakh crore on the back of a surge in excise collections.
While for a layman two macroeconomic indicators showing completely different pictures may be a little puzzling, experts blame IIP’s constituent sectors for giving wrong analysis. “What’s happening is that a large number of activities which are new to the economy and are growing rapidly are not tracked by IIP,” said Sunil Kumar Sinha, principal economist, India Ratings and Research, explaining the reason for such variance.
“For example, smartphones are not tracked by IIP. This also came up in the GDP data where manufacturing for the first quarter (April-June) grew by 9.1 per cent but at the same point IIP came at just 0.6 per cent. This problem has again shown up now as the indirect tax collection has grown by 27 per cent between April to August but IIP has not captured it,” added Mr Sinha.
Reacting to the industrial growth, economic affairs secretary Shaktikanta Das said: “It (contraction in industrial production) is certainly a matter of concern, but let us also remember that the IIP data are a sample of 400 companies. So, they are not truly reflective of the state of affairs.”