INDEX OF INDUSTRIAL PRODUCTION (IIP)
Context: The Quick Estimates of Index of Industrial Production (IIP) with base 2011-12 for the month of December 2019 stands at 133.5, which is 0.3% lower as compared to the level in the month of December 2018.
WHAT IS INDEX OF INDUSTRIAL PRODUCTION? The Index of Industrial Production (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), Ministry of Statistics and Programme Implementation on a monthly basis (six weeks after the reference month ends). It is basically a composite indicator that measures the growth rate of industry groups classified under: 1. Broad sectors, namely, Mining, Manufacturing and Electricity 2. Use-based sectors, namely Basic Goods, Capital Goods and Intermediate Goods. The level of the Index of Industrial Production (IIP) is an abstract number, the magnitude of which represents the status of production in the industrial sector for a given period of time as compared to a reference period of time. The base year was at one time fixed at 1993–94 so that year was assigned an index level of 100. The current base year is 2011-2012. The Eight Core Industries comprise nearly 40.27% of the weight of items included in the Index of Industrial Production (IIP). These are Electricity , steel, refinery products, crude oil, coal, cement, natural gas and fertilisers.
The Office of the Economic Advisor, Ministry of Commerce and Industry made the first attempt of compilation and release of IIP with base year 1937. The all-India IIP is being released as a monthly series since 1950. After 1937, the successive revised base years were 1946, 1951, 1956, 1960, 1970, 1980–81, 1993–94 and 2004-2005. REVISION OF IIP TO 2011-12 BASE YEAR The Central Statistics Office (CSO) revised the base year of the all-India Index of Industrial Production (IIP) from 2004-05 to 2011-12 on 12 May 2017. The revised IIP (2011-12) not only reflect the changes in the industrial sector but also aligns it with the base year of other macroeconomic indicators like the Gross Domestic Product (GDP) and Wholesale Price Index (WPI). IIP in the revised series continued to represent the Mining, Manufacturing and Electricity sectors. The basket of the new series contains 407 item groups ( 405 manufacturing sector item groups (comprising of 809 items) and one item group each of mining and electricity). The revised series uses the National Industrial Classification (NIC) 2008 for the purpose of classification of industrial production. Selection of items has been done at 3-digit level of NIC 2008 from the Annual Survey of Industries (ASI) data by ensuring that the selected items cover at least 80% of the output of each 3 digit group. The unit coverage of IIP, as before, covers entities in the organized sector units registered under the Factories Act, 1948. WHICH ARE THE SOURCES FOR THE COMPILATION OF NEW IIP SERIES? The new series has 14 sources namely: (i) Department of Industrial Policy and Promotion (DIPP); (ii) Indian Bureau of Mines; (iii) Central Electricity Authority; (iv) Joint Plant Committee, Ministry of Steel; (v) Ministry of Petroleum and Natural Gas; (vi) Office of Textile Commissioner; (vii) Department of Chemicals and 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. IMPORTANCE OF IIP IIP is used as core ingredient in the compilation of annual and quarterly national accounts and forecasts of GDP. Furthermore, the availability of IIP on a monthly basis makes it amenable to be used as a reference series in the compilation of cyclical indicators. For instance, National Income Accounts (NIA) uses IIP figures to proxy the growth in unorganized sectors, which is otherwise available only with a gap of 5 years.
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