Whalesbook
Why India Needs Better Manufacturing Data
Manufacturing is key to India's economic growth, with ambitious goals to boost its share in GDP. However, the tools used to track this growth, like the Annual Survey of Industries (ASI) and National Accounts Statistics (NAS), have long delays. Detailed industrial data can take 18-24 months, and aggregated GVA figures up to a year. The monthly Index of Industrial Production (IIP) offers some speed but its limited scope and unpredictable changes restrict its usefulness. This lack of timely information creates a major gap for policymakers and investors needing to understand the fast-changing manufacturing landscape and use resources effectively. Faster, reliable economic signals are crucial for a nation aiming for global manufacturing leadership.
Electricity Use: A Real-Time Economic Gauge
A powerful solution lies in using electricity use data. Manufacturing uses a lot of energy, with machinery and production lines heavily reliant on power. Unlike measures like worker use or capacity use, electricity usage is constantly metered, hard to fake, and easy to get often, sometimes daily or monthly, with detailed geographic and sector information. Seen during COVID-19, electricity use closely followed economic activity changes, offering early signs of slowdowns and recoveries before official figures appeared. Indian data confirms this trend, showing a very strong link, often cited around 0.99, between national manufacturing GVA and electricity consumption over the past fifteen years. This link remained strong through different economic periods, policy changes, and market shocks. States with large industrial bases, such as Gujarat, show links near 0.96. Manufacturing-heavy states like Maharashtra, Karnataka, and Uttar Pradesh maintain links around 0.9. Even at the sector level, industries like food processing, pharmaceuticals, and automobiles show links above 0.9, showing how closely energy use and industrial production are tied. The Indian government's 'Make in India' initiative, with large funding amounts like the ₹10,900 crore PLI scheme for food processing, needs effective tracking of increased production and capacity. This makes this kind of fast data essential. Electricity use is less useful for service industries.
Building a Real-Time Tracking System
To move from just seeing a link to predicting in real-time, a careful statistical method is needed. By collecting industrial electricity use data—specifically from industrial feeders and high-tension manufacturing connections already recorded by State electricity companies (discoms)—and grouping it by the National Industrial Classification (NIC), a strong early warning system can be built. Collected weekly or monthly, and adjusted for factors like scale, industrial makeup, and trends, this data can provide reliable early signals of manufacturing activity. This offers a major benefit over older methods, allowing faster policy changes and smarter investment choices. The worldwide trend to use other fast-moving data sources, including digital transaction records and satellite images, shows a bigger change in how we measure the economy. Electricity consumption is an especially powerful and easy-to-use substitute for manufacturing in many countries.
Coordination and Challenges Ahead
Making this data-driven insight work requires coordinated government action. The Ministry of Statistics and Programme Implementation (MoSPI) should lead, possibly creating an expert group with the Central Electricity Authority (CEA) and State discoms. These bodies already collect detailed consumption data but lack integrated systems for analysis. Standardized guidelines from the CEA are crucial for consistently linking electricity use to industrial activity and ensuring data can be compared across states. Support for states to link electricity connection data with factory records will be vital for strengthening statistical frameworks, especially for Micro, Small, and Medium Enterprises (MSMEs) which are often missed by traditional data collection. However, significant challenges lie ahead. Slow government processes, the difficulty in making data consistent across different state electricity companies, and possible pushback against new ways of doing things could slow things down. Also, as India pursues energy efficiency and moves to cleaner energy, how much electricity manufacturing uses directly might change, meaning the indicator will need regular updates. The accuracy depends on properly categorizing electricity use and ensuring it reflects core manufacturing output, not related tasks. Analyst reports have pointed out the need for better data systems in India's manufacturing sector, but actually putting these different data sources together is a tough job. Industry reports from early 2025 showed continued focus on manufacturing growth but also raised concerns about having data fast enough to guide policy effectively.
The Way Forward
Despite the challenges, using electricity use as a near-real-time indicator is a key step forward in tracking India's economy. Changes in electricity demand can offer more useful information than old GVA figures. For a policy focus on jobs, value, and competitiveness under 'Make in India,' fast data signals are vital for smart strategy and steady growth in manufacturing.