Everybody knows by now India is the fastest-growing major economy in the world. But look at the accompanying chart, which ranks countries by their growth in industrial production. Note that, in contrast to its standing in the gross domestic product (GDP) league tables, India is far from the top in industrial growth. As the chart shows, China, Vietnam, Turkey, Malaysia, Indonesia, Pakistan, Spain, Italy, France and the UK are some of the countries that have higher growth rates of industrial production than India.

The yardstick taken for industrial production growth in India is the Index of Industrial Production (IIP). The discrepancy between the IIP growth rates and the GDP growth rates and between the IIP data and industrial growth according to the GDP numbers is well known, and many economists have drawn attention to it. Many reasons have been suggested for the inconsistency: different base years, the fact that IIP measures volumes while GDP measures value added, different modes of calculating the figures, incomplete coverage. There is a raging controversy among economists about the new GDP series, while the weaknesses in the IIP numbers are common knowledge. All we can say is the wide variation in macro indicators is a huge cause of confusion.

When finance minister Arun Jaitley presents his budget on 29 February, should he focus on the excellent industrial growth according to the GDP statistics, or the contraction in industrial production according to the IIP data?

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