In a first-of-its-kind exercise, the National Statistical Commission (NSC) has ordered an audit of the process used in the construction of economic data, starting with the Index of Industrial Production (IIP).

The move comes amid criticism of the quality of data dished out by various government agencies, including the Central Statistical Organisation. Just last month, the Reserve Bank of India (RBI) had termed the industrial growth figures highly volatile and expressed doubts about how effectively the index reflected the underlying momentum in the industrial sector. A few days before that, CSO had issued a corrigendum on the national accounts data. Even earlier, RBI had questioned the inflation data released by the government.

We are just beginning this exercise and the first audit has been ordered for IIP. With this, we hope to learn both about how we will do statistical audits in future and then develop mechanisms to strengthen the system, Chief Statistician T C A Anant told Business Standard in an interview.

The audit will be undertaken by the Ministry of Statistics and Programme Implementation (Mospi), under the direction of the five-member NSC, headed by R Radhakrishna.

The idea of a statistical audit was not new. One of the mandates of the NSC had been to conduct statistical audit for every important macroeconomic data series. In a decentralised statistical system, an audit went a long way in identifying and improving statistical gaps that resulted from difference in administrative processes and functions of various agencies involved in data collection, officials in the statistics ministry said.

The results of the audit will be put in the public domain. This is expected to generate transparency and instil confidence in the way these numbers are generated, Anant added.

The IIP data is compiled by Mospi after receiving data from different ministries and state agencies. Mospi is not directly involved with the primary data collection, though it is responsible for maintaining the quality of the data. For that purpose, Mospi, along with various state agencies, conducts periodic sample surveys used to maintain the quality of the data received on a monthly basis. Such a sample, in the case of the IIP, is the Annual Survey of Industries (ASI).

The latest IIP numbers, which estimated the growth at 13.8 per cent, led by a 63 per cent growth in capital goods, was criticised for being exaggerated. An exercise conducted by Business Standard showed the growth should be around 22 per cent.

Moreover, in the past, the data series has witnessed several revisions and analysts have complained of eroding reliance on provisional figures. Such a reaction was prompted by a sharp decline in the revised industrial growth for June 2010 to 5.8 per cent, from a provisional estimate of 7.1 per cent.

Yes, we have received complaints and we are working on it. But, it is not a reaction to those complaints. We are aware of the deficiencies in our data system and the audit will help matters, said another statistics ministry official who did not wish to be identified.

The audit will look into every state and central agency involved in data collection for IIP. It will go into the various sources from which data are collected to identify gaps and areas of inefficiency. The ministry intends to initiate corrective measures to fill the gaps that the report identifies.