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What do we gain from Seasonal Adjustment of the Indian Index of Industrial Production (IIP)?

Author

Listed:
  • Pandey, Radhika

    (National Institute of Public Finance and Policy)

  • Sapre, Amey

    (National Institute of Public Finance and Policy)

  • Sinha, Pramod

    (National Institute of Public Finance and Policy)

Abstract

In this paper we conduct a seasonal adjustment (SA) of the 2011-12 base series of Index of Industrial Production (IIP). We use the x-13 ARIMA-SEATS iterative process and follow an indirect approach of first identifying seasonality at the product level and then recompile the manufacturing index with seasonally adjusted series. The SA process shows identifiable seasonality in 206/405 (almost 50%) items spread within broad NIC groups of food, beverages,textiles, leather & apparels. Seasonally adjusted levels also provide a smooth and low fluctuation series that can be used for extrapolation in the advance and provisional estimate stage of GDP estimates. However, the SA process reveals several data quality issues of inexplicable outliers, growth rates and changes in pattern of individual items. While seasonal adjustment has advantages, the process pre-supposes pristine data quality and given the trends shown by item level data, both the SA and actual IIP are inadequate in explaining the growth performance of the manufacturing sector.

Suggested Citation

  • Pandey, Radhika & Sapre, Amey & Sinha, Pramod, 2020. "What do we gain from Seasonal Adjustment of the Indian Index of Industrial Production (IIP)?," Working Papers 20/322, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:20/322
    Note: Working Paper 322, 2020
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    File URL: https://www.nipfp.org.in/media/medialibrary/2020/10/WP_322_2020.pdf
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    References listed on IDEAS

    as
    1. Ila Patnaik & Rajeswari Sengupta, 2020. "Impact of Covid-19 on Indian economy: An Analysis of fiscal scenarios," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-026, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. S. Mahendra Dev & Rajeswari Sengupta, 2020. "Covid-19: Impact on the Indian economy," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-013, Indira Gandhi Institute of Development Research, Mumbai, India.
    3. Bose, Sukanya & Bera, Manasi & Ghosh, Priyanta, 2020. "Centre-State Spending on Elementary Education: Is it Complementary or Substitutionary?," Working Papers 20/320, National Institute of Public Finance and Policy.
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    1. Patnaik, Ila & Pandey, Radhika, 2020. "Four years of the inflation targeting framework," Working Papers 20/325, National Institute of Public Finance and Policy.

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    More about this item

    Keywords

    Seasonal Adjustment ; X-13 ARIMA-SEATS ; Index of Industrial Production ; Fluctuations ; India;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • P44 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - National Income, Product, and Expenditure; Money; Inflation

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