Index of Industrial Production (IIP) Syllabus

  • IASbaba
  • September 2, 2022
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In news: Growth in the output of eight core infrastructure sectors decelerated sharply for a second straight month to hit a six-month low of 4.5 per cent in July from a year ago, as a conducive base effect waned considerably.

This may weigh down the growth of the index of industrial production (IIP) in July from 6.7 percent in June, given that the core industries make up for 40.30 per cent of the IIP. What is the Index of Industrial Production?

  • IIP is a composite indicator measuring changes in the volume of production of a basket of industrial products over a period, with respect to a chosen base period.
  • It is compiled and published monthly by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.
  • 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.
  • Base Year for IIP is 2011-2012.

Significance of IIP:

  • It is used by government agencies including the Ministry of Finance, the Reserve Bank of India, etc, for policy-making purposes.
  • IP is the only measure on the physical volume of production.
  • It forms a crucial input for compilation of Gross Value Added (GVA) of the manufacturing sector in the Gross Domestic Product (GDP) on a quarterly basis.
  • IIP remains extremely relevant for the calculation of the quarterly and advance GDP estimates.
  • It is also used extensively by financial intermediaries, policy analysts and private companies for various analytical purposes.

About Eight Core Sectors:

  • These comprise 40.30% of the weight of items included in the Index of Industrial Production (IIP).
  • The eight core sector industries in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.

Source: Indianexpress

Previous year question

Q.1) In the ‘Index of Eight Core Industries’, which one of the following is given the highest weight? (2015)

  1. Coal production
  2. Electricity generation
  3. Fertilizer production
  4. Steel production

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