NEW DELHI: Following the overhaul of the Index of Industrial Production (IIP) for the formal sector, the Indian government is now turning its attention to the vast informal economy. The statistics ministry is finalising plans to launch an entirely new index designed to measure monthly industrial production specifically for the country's large informal manufacturing sector. Additionally, a parallel index tracking production and economic output across the informal service sector is also being developed, officials told TOI.
Data Sources and Methodology
The data architecture for these new series will draw extensively from the latest surveys, such as the Annual Survey of Unincorporated Sector Enterprises (ASUSE) and the Periodic Labour Force Survey (PLFS). Their local sample sizes will be expanded to get a clear picture of production in the vast unorganised sector, which is the mainstay for millions of people, an official said.
Current Proxy Methods and Their Limitations
Currently, India's statistical machinery calculates growth in the informal sector using proxy methods, assuming it mirrors the performance of the formal sector. This proxy method creates significant distortion, especially after economic shocks like the COVID-19 pandemic, where informal enterprises were hit hard and suffered a lag in recovery. As a result, these new indices will allow policymakers to create distinct economic deflators, ensuring real GDP growth figures reflect actual conditions.
Timeline and Future Plans
Earlier, TOI reported that the government is working to release the first-ever Index of Services Production (ISP) around July. This will help assess short-term movement in production in the formal services sector, complementing the new IIP series with the revised 2022-23 base year, which was unveiled on Monday. The new indices for the informal sector will take time to formulate, as they are in early stages of discussion. However, the National Statistical Office (NSO) remains committed to providing better data for improved governance. The informal sector, which is quite large, needs better metrics to help policymakers formulate schemes and programmes, the official added.
