On the variations in the index of industrial production numbers, the Governor said the IIP was another statistics that has shown counter-intuitive trends. “During the period when the global financial crisis was at its peak, December, 2008 to June 2009, IIP growth was positive, according to the then available IIP series. But this was contrary to our assessment of the underlying trend of some deceleration on account of the crisis.

“The new IIP series, revised with 2004-05 as the base year, now shows that IIP growth was, in fact, negative during that period vindicating our intuition.

Again, the old IIP series indicated that industrial activity slowed in the second half of 2010-11 relative to the first half, but the revised IIP series shows that it maintained roughly the same pace between the two halves of the fiscal year,” Dr. Subbarao said.

Attributing the sharp volatility in the IIP numbers to the capital goods sector, the Governor said this was analytically bewildering. Ironically, the volatility persisted even in the new series too, he noted.

“It is important for policy purposes to determine whether the root cause of such behaviour is the production decisions in the wake of uncertainty or whether it is due to the compilation process,” Dr. Subbarao said and explained that items, particularly with a manufacturing cycle of longer than a month could lead to sharp month-to-month spikes/dips, not necessarily consistent with the underlying demand in the economy.