The Indian government is poised to launch new indices aimed at capturing the production dynamics of the country's vast informal manufacturing and services sectors. This move follows the recent overhaul of the Index of Industrial Production (IIP) for the formal sector.
Addressing the Informal Sector
The informal sector, a critical component of India's economy, has long been a statistical blind spot. The new indices will leverage data from the Annual Survey of Unincorporated Sector Enterprises (ASUSE) and the Periodic Labour Force Survey (PLFS) to provide a clearer picture of production activities.
"The informal sector, which is quite large, needs better metrics to help policymakers formulate schemes and programmes," an official stated.
Why Now?
Historically, growth in the informal sector has been estimated using proxy methods, assuming it mirrors the formal sector's performance. This approach has led to distortions, especially following economic shocks like the COVID-19 pandemic. The new indices aim to rectify this by offering distinct economic deflators, ensuring that GDP growth figures accurately reflect real conditions.
Comparative Analysis
| Sector | Current Method | New Method |
|---|---|---|
| Informal Manufacturing | Proxy from Formal Sector | Direct Measurement via ASUSE & PLFS |
| Informal Services | Proxy from Formal Sector | Direct Measurement via New ISP |
Implementation Timeline
The indices are in the early stages of discussion, with the National Statistical Office (NSO) committed to enhancing data quality. The first-ever Index of Services Production (ISP) is expected to be released around July, complementing the revised IIP series.
These developments underscore the government's commitment to improving governance through better data, ultimately aiding in the formulation of more effective economic policies.
