Index of Industrial Production (IIP)
The Index of Industrial Production (IIP) reflects the growth of core industrial sectors in an economy. The IIP 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. It essentially takes a basket of industrial products and creates an index by assigning different weights to different products. Growth in industrial production is determined by comparing the monthly values of this index with the index value in the same month last year. This rate of growth (positive or negative) in IIP signals India’s industrial health or the lack of it.
The IIP is the weighted-average of 3 indexes - Mining (14.4%), Manufacturing (77.6%) and Electricity (8%). In addition, the IIP also constitutes 6 use-based weighted-average indexes - Primary Goods (34%), Capital Goods (8.2%), Intermediate Goods (17.2%), Infrastructure/Construction Goods (12.3%), Consumer Durables (12.8%), Consumer Non-Durables (15.3%).
Eight core Industries (Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity) comprise 40.27% of the weight of the items included in IIP which is tracked through the Index of Infrastructure Output. Some sectors may outperform others due to a variety of reasons, such as growth prospects, position in the business cycle, government policy, international factors, etc.
IIP is a short-term measure of industrial growth till the outcomes from Annual Survey of Industries (ASI) and National Accounts Statistics such as GDP are available. It is compiled and published monthly by the National Statistical Office, Ministry of Statistics and Programme Implementation (MoSPI) six weeks after the reference month ends.
The Base Year for the IIP is 2011-12 with a value of 100. So if the index for mining in Mar'20 is say 132.7, it implies that compared to 2011-12 index value of 100, mining has performed at a growth rate of 32.7% in 8 years.
The Index of Industrial Production (IIP) reflects the growth of core industrial sectors in an economy. The IIP 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. It essentially takes a basket of industrial products and creates an index by assigning different weights to different products. Growth in industrial production is determined by comparing the monthly values of this index with the index value in the same month last year. This rate of growth (positive or negative) in IIP signals India’s industrial health or the lack of it.
The IIP is the weighted-average of 3 indexes - Mining (14.4%), Manufacturing (77.6%) and Electricity (8%). In addition, the IIP also constitutes 6 use-based weighted-average indexes - Primary Goods (34%), Capital Goods (8.2%), Intermediate Goods (17.2%), Infrastructure/Construction Goods (12.3%), Consumer Durables (12.8%), Consumer Non-Durables (15.3%).
Eight core Industries (Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity) comprise 40.27% of the weight of the items included in IIP which is tracked through the Index of Infrastructure Output. Some sectors may outperform others due to a variety of reasons, such as growth prospects, position in the business cycle, government policy, international factors, etc.
IIP is a short-term measure of industrial growth till the outcomes from Annual Survey of Industries (ASI) and National Accounts Statistics such as GDP are available. It is compiled and published monthly by the National Statistical Office, Ministry of Statistics and Programme Implementation (MoSPI) six weeks after the reference month ends.
The Base Year for the IIP is 2011-12 with a value of 100. So if the index for mining in Mar'20 is say 132.7, it implies that compared to 2011-12 index value of 100, mining has performed at a growth rate of 32.7% in 8 years.
SUBJECT Variables
SECTORAL
The IIP is the weighted-average of 3 indexes - manufacturing, mining and electricity. The relative weight of these in the Index are manufacturing (77.6%), mining (14.4%), and electricity (8%).
The sector composition is one of the ways to classify the products in IIP, under which a basket of products is grouped under manufacturing, mining and electricity - the other being a use-based classification.
- Industrial production, or the factory output, gauged by the Index of Industrial Production (IIP) comprising the three sectors of manufacturing, mining, and electricity grew by 1.7% in Feb'22, compared to the revised figure of 1.5% in Jan'22.
- For April 2021-February 2022, industrial output has clocked a growth of 12.5% against a contraction of 11.1% in the corresponding period of FY21.
- After rising for 6 consecutive years between 2013 and 2018, overall industrial output fell by 0.8% YoY in 2019-20 and 8.5% YoY in 2020-21. The drop in 2020-21 can be explained by the lower industrial activity from Covid-induced lockdowns.
- Mining output recorded a 4.5% YoY growth in Feb'22, in comparison to a 2.8% growth in Jan'22.
- After rising for 6 consecutive years between 2015 and 2019, mining output fell by 7.8% YoY in 2020-21. This is primarily attributed to lower industrial activity from Covid-induced lockdowns.
- The manufacturing sector, which comprises 77.6% of the index of industrial production, registered a growth of 0.8% in Feb'22.
- Within the manufacturing sector, the production of leather & leather products registered the sharpest fall of -16.6%, followed by the production of other transport equipment at -15.5%. The production of furniture witnessed the biggest YoY increase of 25.7% in Feb'22, followed by tobacco products at 14.5%.
- After rising for 6 consecutive years between 2013 and 2018, YoY manufacturing output fell by 1.4% in 2019-20 and 9.6% in 2020-21. The drop in 2020-21 can be explained by the lower industrial activity from Covid-induced lockdowns.
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