Daily News Analysis

Index of Industrial Production  

14th October, 2021 Economy

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Context:

  • India's industrial production rose 11.9% in August, according to official data.

About IIP:

  • As the name suggests, the Index of Industrial Production (IIP) maps the change in the volume of production in Indian industries.
  • More formally, it chooses a basket of industrial products — ranging from the manufacturing sector to mining to energy, creates an index by giving different weight to each sector and then tracks the production every month.
  • Finally, the index value is compared to the value it had in the same month last year to figure out the economy’s industrial health.
  • There are two ways in which IIP data can be viewed. The first is to look at sectoral performance. In this the whole industrial economy is divided into three sectors; the first is manufacturing with a weight of 77.6 per cent in the index, the second is mining with a weight of 14.4 per cent and third is electricity with a weight of 8 per cent.
  • 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.

Calculation of IIP:

  • The IIP index is computed and published by the Central Statistical Organisation (CSO) on a monthly basis.
  • 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.