The credit rating agency Crisil has described the official data on index of industrial production (IIP) for November 2016, during which demonetisation was announced, as a false positive. India’s factory output that had fallen by 1.8 per cent in October; suddenly rose by 5.7 per cent in November it. The rating agency has said that November figures do not reflect the true condition of the Indian manufacturing sector.
Crisil further stated that a term false positive implies that the growth rate indicated is too high. However, it was expected to be in the negative zone as November was the first month to have captured the impact of demonetisation. It also pointed that the IIP base year has not been updated and the index of industrial production grew by 5.7 per cent on-year in November, on account of a weak base.
The rating agency said that such month-to-month the data is too volatile, it cannot be used to make long-term projections. It added that going by the production trend in some sectors such as auto, next month’s (December) IIP growth data may be more indicative of the impact of demonetisation.