It is amazing how frequent economic data gets leaked in India. I am not sure how the mechanism works, but it does. Some people seem to get some privilege over certain data and I would guess take positions in financial markets based on this and make a lot of money in process (atleast more than others). It is often the case that just before any major data/policy release, there is some unusual moment in financial markets (sudden dip or rise) and people figure data has been leaked.
It was inflation around 2008, then there have been instances of leak in RBI mon policy (there was some investigation for the same as well) and a few other cases.
Recently it has been IIP. And actually if one checks the polls done before the data release, you see outlier predictions coming right. The whole markets forecast is round an average range of something, but usually one gets the printed number close to the outlier…It has been happening for a few months now where certain forecasts are meeting the print figure bang on with a difference of 0.1-0.5% points here and there.
One cannot pinpoint this on leakage of data and some might say it is forecasting skills. Well that is too good to be true given the volatility of IIP data (and most data released in India). In terms of efficiency markets hypothesis, it is really weak form market where both new and insider information seem to matter.
Not sure how does one curb it (as don’t know the flow of information) but needs to be looked at urgently…
Barring this, the data is so volatile that there is no credibility. RBI has been openly criticising the IIP data:
The Index of Industrial Production (IIP) is another statistic that has shown counter-intuitive trends. During the period when the global financial crisis was at its peak – December 2008 to June 2009 – IIP growth was positive according to the then available IIP series. This was contrary to our assessment of the underlying trend of some deceleration on account of the crisis. The new IIP series, revised with 2004/05 as the base, now shows that IIP growth was, in fact, negative during that period vindicating our intuition. Again, the old IIP series indicated that industrial activity slowed in the second half of last year (2010/11) relative to the first half but the revised IIP series shows that industrial growth maintained roughly the same pace between the two halves of the fiscal year.
Even my report on IIP shows, volatility has not been lower in the new series. It is actually higher in few sectors like basic, intermediate and consumer non-durable goods.
How does one make any sense of the trends based on this data?