New rules for company disclosure can worsen the quality of industrial data

The new norms on company disclosure and reporting standards are, ironically, more likely to worsen data quality in manufacturing and other sectors. Companies are no longer mandated to reveal such quantitative information as installed capacity and production statistics on manufactures in their annual reports, to align reporting norms with global standards.

In tandem , what is vital is to tighten data-reporting requirements for producing units to improve the quality and reliability of such widely-tracked statistical indices as the index of industrial production ( IIP). Without reliable, up-to-date figures, the entire policy process would be akin to plodding along, stumbling and groping in the dark.

The new guidelines on reporting follow the revision in Schedule VI of the Companies Act, which stipulates the format for financial statements and balance sheets. In the past, Indian companies have complained that detailed disclosure requirements put them at a disadvantage vis-à-vis competitors abroad what with their production details publicly available, but not the corresponding figures of the other side.

However, even as we stop putting supposedly onerous disclosure requirements on companies here, data agencies at both the Centre and states need to be suitably empowered , as per the Collection of Statistics Act, 1953, to routinely receive updated figures across the board. The latest disclosure norms to be dropped actually date back from the era of retrograde industrial licensing that has thankfully been abolished since the early 1990s.

Yet, liberalisation in industry, in removing elaborate licensing requirements, seems to have compromised data quality in the real economy. Notice, for example, the growing divergence between corporate results and the industrial index figures.

Almost 60% of the net domestic product now originates in the unorganised sector, and without foolproof norms to tighten data-reporting requirements in industry, the quality of national statistics would be increasingly suspect. Hence the pressing need for proactive policy including public-private partnerships for improved data quality.