Exports-IIP gap shows more data troubles
India's recent phenomenal growth in exports is not consistent with industrial output numbers, shows an ET study, reinforcing fears of economists and policymakers that the country's data gathering mechanism is becoming increasingly unreliable.
While July's industrial growth fell to a 21-month low of 3.84%, exports during that month grew at 72% in rupee terms. In August, export growth was 40% while industrial output rose 4.04%.
An ET analysis of the latest disaggregated trade data shows exports of machines and instruments grew 65% during the first two months of this fiscal while their production in the comparable category of machines and equipments declined 1% and 6% during April and May, respectively.
"These figures obviously don't make any sense. The IIP growth needs to be at least 7% higher if the export growth is correct," said Pronab Sen, principle advisor,Planning Commission. "The only explanation is either the export or the IIP numbers are wrong."
In July, Reserve Bank governor too raised an alarm over the sharply varying macroeconomic data, including those on growth, which could lead to taking the wrong call on the economy.
The IIP and export data sets for April and May threw up a similar pattern in the case of other products. Exports of textiles, rubber and paper and wood products grew at 22%, 55% and 45% even though their production declined. Rating agency CRISIL's recent study estimates that 28% of machines and equipment and 41% of textiles produced are exported.
Economists say though high inflation could be responsible for bloating the nominal export growth, the inconsistency between IIP and export numbers is still not explained.
"Inflation can't explain these export growth numbers because price rise in these categories was not very high," said Biswajit Dhar, director of think tank RIS.
Wholesale inflation in machine and machine tools was 2.8% in 2010-11 and for rubber, wood and textiles it was 6.6%, 3.9% and 12%, respectively. Experts are divided over the source of the discrepancy. While most believe the export numbers to be exaggerated, some officials believe the problem is with the IIP figures.
"Even after accounting for all caveats, there's some part of exports which is unexplained, given trends in global imports, and there might be an element of over-reporting," said Saugata Bhattacharya, chief economist with Axis Bank.
Slow growth, both globally and in India, makes the high export growth numbers less credible, economists believe. The US and Singapore, India's second and third largest export destinations respectively, grew 1.3% and 0.9% in the Apr-June quarter. India's GDP growth also slowed in April-June to 7.7%.