What is IIP?
What is IIP?

The index of Industrial Production (IIP) conveys the status of production in the industrial sector of an economy in a given period of time, in comparison with a fixed reference point in the past.

The IIP numbers, released every month in India , for instance, use 1993-94 as the base year for comparison.

The IIP figures are generally seen as an important but short-term indicator of whether industrial activity in a country has risen or dipped, till more detailed studies or surveys are available.

(Posted date - 20 June 2012)
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How and when is it computed??

The IIP estimate for a given month is always released within six weeks from that month.

The data for the IIP estimate is supplied by 15 source agencies which include Department of Industrial Policy and Promotion, Indian Bureau of Mines, Central Statistical Organisation and Central Electricity Authority, among others.

However, given the fact that all the data regarding production may not be available at the time the index for a particular month is being created, a provisional index is first created and released, which is then updated twice in the subsequent months.
How has the IIP evolved with time?

The IIP was first compiled and released using 1937 as the base year and included 15 industries.

Subsequently, it has been updated at least seven times, both with regards to the base year as well as the nature of items included, to keep the data relevant.

In the latest norms outlined by the ministry of statistics with 1993-94 as the base year, one of the fundamental criteria for selection of items is that it should account for at least Rs 80 crore of gross value of output at the item level and Rs 20 crore of gross value added at the ultimate digit level.

Another essential feature was that monthly production data for the items needed to be available on a sustained basis.

It also included attempts at representing the small scale and unorganised manufacturing sector.

While the items which are taken into consideration are classified into item groups under the three heads of mining, manufacturing and electricity, they have also been classified under use-based categories like basic goods, capital goods, intermediate goods, consumer durables and consumer non-durables.
Why are IIP figures in the news?

There has been a lot of buzz surrounding the IIP figures released for August as it reported a 10.4% growth in industrial output, in comparison to a growth of 7.2% in July.

In fact, August has seen the highest industrial production growth in almost two years.

The consumer durable and capital good sectors, particularly, have contributed to this spurt. Many experts also see this as a response to the government's fiscal stimulus measures.

This may lead to GDP growth slightly higher than the estimated 6% for the current financial year.