Index for Industrial Production (IIP)

What is Index for Industrial Production

• Measures the quantum of changes in the industrial production in an economy.

• The current base year for the IIP series in India is 2011-12.

• It is compiled and published every month by the National Statistical Office (NSO) under the Ministry of Statistics and Program Implementation (MoSPI).

The Quick Estimates of Index of Industrial Production (IIP) are released on 12th of every month (or previous working day if 12th is a holiday) with a six weeks lag and compiled with data received from source agencies, which in turn receive the data from the producing factories/ establishments. 

Categorization Of IIP:

• Sectoral Classification: Mining, Manufacturing and Electricity. Highest weightage has been assigned to Manufacturing. The sectoral composition of the IIP is as follows:

Use-Based Classification:

• Primary goods: Goods directly obtained from natural sources and used for further processing and consumption E.g.: Ores and Minerals and Electricity.Capital goods: Plants, machinery and goods used for further investments. E.g.: Boilers, Air & Gas Compressors, Engines including Internal Combustion and Diesel Engine.Infrastructure/ construction goods: Finished goods which are primarily used in the infrastructure industry or construction industry as an input. E.g.: paints, cement, cables, bricksIntermediate goods: Any good/product produced as an incomplete product, or which goes as input in production for further finishing or forming a part of a product. E.g.: Cotton yarn, Plywood etc.Consumer durables: Products directly used by consumers and having a longer durability (more than 2/3 years). E.g.: Pressure Cooker, Air Conditioners, Tyres etc.

Consumer non-durables: Products that are directly used by consumers and can’t be preserved for long periods. E.g.: Soybean Oil, Full cream/ Toned/ Skimmed milk etc.

• Index Of Eight Core Industries:
  • In India there are eight core sectors comprising coal, crude oil, natural gas, petroleum refinery products, fertilisers, steel, cement and electricity.
  • The eight core industries constitute 40.27% of the total IIP.
  • This index is prepared by the Office of the Economic Advisor, Ministry of Commerce and Industry and is published monthly with the base year as 2011-12.
  • Weightage of different sectors in the Index:

• Note: It is noted that IIP is published by CSO, MoSPI while Index of Eight core Industries is published by Office of Economic Advisor, Ministry of Commerce and Industry.

Revision of base year

• The IIP is an index which shows the growth rates in different industry groups of the economy in a stipulated period of time. The IIP index is computed and published by the Central Statistical Organisation (CSO) on a monthly basis.
• The Central Statistics Office (CSO) revises the base year of the macroeconomic indicators, as a regular exercise, to capture structural changes in the economy and improve the quality and representativeness of the indices. The base year of the all-India Index of Industrial Production (IIP) was revised from 2004-05 to 2011-12 to not only reflect the changes in the industrial sector but to also align it with the base year of other macroeconomic indicators like the Gross Domestic Product (GDP), Wholesale Price Index (WPI).
• Revisions in the IIP are necessitated to maintain representativeness of the items and producing entities and also address issues relating to continuous flow of production data.
• With the release of the new series of IIP (base 2011-12), an institutional mechanism has been established for facilitating dynamic revision of the item list of products and the panel of factories, through a Technical Review Committee, chaired by Secretary, MoSPI. This Committee will meet at least once a year for identifying new items that need to be included in the item basket and removing those that have lost their relevance in the industrial sector or are no longer being produced.
• IIP in the revised series will continue to represent the Mining, Manufacturing and Electricity sectors. The revised series uses the National Industrial Classification (NIC) 2008 for the purpose of classification of industrial production. The unit coverage of IIP will, as before, cover entities in the organised sector units registered under the Factories Act, 1948.
• At the broad level, the new series has a total of 809 items occurring in the manufacturing sector in the item basket (405 item groups), where 149 new items like Steroids and hormonal preparations, Cement clinkers, Medical/ surgical accessories, Prefabricated concrete blocks, refined Palm Oil have been added and 124 items such as Biaxially Oriented Polypropylene (BOPP) Films, Calculators, Colour TV picture tubes, Gutka have been deleted from the 2004-05 series which had 620 items (397 item groups) in the manufacturing sector.
• To reflect the increasing significance of electricity generation from renewable sources, it has been decided to include data on electricity generation figures from these sources in the new series.
• The number of source agencies reporting data for compilation of IIP in the new series will be 14 as compared to 15 in the outgoing series.