Industrial index fails reality
Star Report
Is the Quantum Index of Production (QIP) truly reflecting the behaviour of the manufacturing sector? The question now rings around the corners as very conflicting figures regarding industrial loan disbursement, import of capital machinery and industrial production appeared from the official sources. Another riddle that now needs a close look is the decrease of real wage rate during July-February period of this fiscal year. The fundamental question here is why real wage rate decreased when investment is picking up? "It needs to be investigated whether we are having 'a jobless growth' in the economy," explained Dr Debapriya Bhattacharya, executive director of the Centre for Policy Dialogue (CPD). "This means that the investment-employment linkages are not very strong because of the nature of the sector where the money is going. It is well known that the service sector generates less jobs than manufacturing from unit value of money. This year's contribution of manufacturing to incremental GDP growth had been quite respectable, but the service sector remains the single largest source of GDP growth. More importantly, crop sector contribution had been relatively low." The inflation adjusted real wage rate during July-February of FY03 was 6 percent, which slipped to 0.13 percent during the same period of this fiscal. Figures also show a 79 percent growth in industrial loan disbursement during July-December of this fiscal. The net term loan flow during the period was Tk 1,063.15 crore against last year's Tk 113.46 crore. Capital machinery import over the first eight months of FY04 was 14.6 percent higher than that of the corresponding period of the previous year to match with the higher term-loan disbursement. But on a point-to-point basis, industrial production has declined between February 2003 and 2004 by about 2.75 percent. Conversely, the first eight months' average QIP for FY04 is only 1.53 percent higher than the same in FY03. "It may be that the outcome of investment is yet to come and that is why the industrial production index is still low," said Dr Debapriya. "But I suspect the QIP determinants are outdated. They are mainly the jute sector industries and other state-owned units which are either closed or working very inefficiently. The new-age industries driving up the industrial growth have not been captured in the QIP."
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