index-of-industrial-production-iip-th

Context: The Index of Industrial Production (IIP) contracted by 10.4% in July 2020.

Analysis 

Index of Industrial Production (IIP) 

  • It 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.
  • It is computed and published by the Central Statistical Organisation (CSO), Ministry of Statistics and Programme Implementation, on monthly basis (with a time-lag of 6 weeks as per the norms of IMF).
  • It is a composite indicator that measures the growth rate of industry groups classified under, 
  • Broad sectors, namely, Mining, Manufacturing and Electricity;
  • Use-based sectors, namely Basic Goods, Capital Goods and Intermediate Goods. 
  • Currently IIP figures are calculated considering 2011-12 as base year with around 407 items. 
  • The monthly figure of production value is first deflated by the Wholesale Price Index (WPI) of the corresponding categories, released by the Office of the Economic Adviser, Ministry of Industry.
  • The scope of the IIP as recommended by the United Nations Statistical Office (UNSO) includes mining, manufacturing, construction, electricity, gas and water supply. But due to constraints of data availability, the IIP compiled in India has excluded construction, gas and water supply sectors. 
  • Following are the three sectors of the IIP as per the revision based on 2011-12 series.
  • (i) Mining (1 item, about 14.3% weight),
  • (ii) Manufacturing (405 items, about 77.6% weight), and
  • (iii) Electricity (1 item, about 7.9% weight).
  • Electricity generation from renewable energy sources has been included under the ‘Electricity’ sector.
  • Weights are rationalised to appropriately to reflect the actual value addition of each sector incorporating effects of subsidies.
  • The all-India IIP data is used for estimation of Gross Value Added of Manufacturing sector on quarterly basis.
  • The industries are divided into six use-based sectors, in descending order of their weights: 
  • Primary goods (weight 34%),
  • Intermediate goods (weight 17%),
  • Consumer non-durables (weight 15%),
  • Consumer durables (weight 13%),
  • Infrastructure/ construction goods (weight 12%),
  • Capital goods (weight 8%).
  • IIP is compiled using data received from 14 source agencies viz. 
  • (i) Department of Industrial Policy & Promotion (DIPP); it alone supplies data for 322 out of 407 item groups with a weight of 47.54% in overall IIP; 
  • (ii) Indian Bureau of Mines; 
  • (iii) Central Electricity Authority; 
  • (iv) Joint Plant Committee, Ministry of Steel; 
  • (v) Ministry of Petroleum & Natural Gas; 
  • (vi) Office of Textile Commissioner; 
  • (vii) Department of Chemicals & Petrochemicals; 
  • (viii) Directorate of Sugar & Vegetable Oils; 
  • (ix) Department of Fertilizers; 
  • (x) Tea Board; 
  • (xi) Office of Jute Commissioner; 
  • (xii) Office of Coal Controller;
  • (xiii) Railway Board; and 
  • (xiv) Coffee Board.