The economy is an important part of the UPSC syllabus. It is a big chunk of the syllabus for the General Studies Paper III in the IAS exam. In this article, we give you a detailed description of the important economic term, the Index of Industrial Production (IIP).
Index of Industrial Production
- The Index of Industrial Production (IIP) is an index that indicates the performance of various industrial sectors of the Indian economy.
- It is calculated and published by the Central Statistical Organisation (CSO) every month.
- It is a composite indicator of the general level of industrial activity in the economy.
Official Definition – As given by CSO
“It is a composite indicator that measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to that in a chosen base period.”
|Index of Industrial Production Published by CSO|
Index of Industrial Production Latest Updates –
- The Index of Industrial Production (IIP), witnessed a growth of 1 per cent in December 2020.
- The Index of Industrial Production (IIP) for the month of September 2019 has contracted by 4.3 % as compared to the month of September 2018.
- This is the first time after November 2012 that all three broad-based sectors (Mining, Manufacturing, and Electricity) have contracted and the lowest monthly growth in the 2011-12 base year series.
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IIP – Explanation
- This index gives the growth rates of different industry groups of the economy over a specified time period.
- The industry groups that it measures are classified under the following:
- Broad sectors like manufacturing, mining, and electricity.
- Use-based sectors like capital goods, basic goods, intermediate goods, infrastructure goods, consumer durables, and consumer non-durables.
- The eight core industries of India represent about 40% of the weight of items that are included in the IIP. The Eight Core Sectors/Industries are:
- Refinery products
- Crude oil
- Natural gas
- The United Nations Statistics Division (UNSD) recommends including quarrying, gas steam and air-conditioning supply, sewerage, water supply, waste management, and remediation in the broad sectors. But this is not done due to the problems in data availability on a monthly basis for all these sectors. So, the data has been restricted to mining, electricity, and manufacturing.
Index of Industrial Production Importance
- The Index is used by government agencies and departments such as the Finance Ministry and the RBI for policymaking.
- It is also used for estimating the Gross Value Added of the manufacturing sector quarterly.
- Also, the Index is used by business analysts, financial experts, and the private industry for multiple purposes.
- It is the only measure of the physical volume of production.
- It is also extremely useful for the projection of advance GDP estimates.
IIP Latest Change
- The latest change in the IIP was made in 2017.
- Any index is to be subject to changes and modifications like changing the base year, including more items in the basket, etc.
- The new and current base year for IIP is 2011 – 12. The previous base year was 2004 – 05.
- Another change was the inclusion and deletion of certain items in the data series.
- Some items introduced:
- Refined palm oil
- Surgical accessories
- Cement clinkers
- Some items removed:
- Chewing tobacco
- This is the 9th base year revision ever since IIP was first published in 1950. The first base year was 1937.
|Index of Industrial Production Base Year: 2011 – 12|
Core industries in the IIP
The following table represents the weight of the eight core industries in the IIP.
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