DR Ambedkar IAS Academy

Index of Industrial Production (IIP)

The Index of Industrial Production (IIP) for the month of September 2019 has contracted by 4.3 % as compared to the month of September 2018.

This is the first time after November 2012 that all three broad-based sectors (Mining, Manufacturing, and Electricity) have contracted and the lowest monthly growth in the 2011-12 base year series.

Reasons for Recent IIP Contraction

Lower agricultural growth impacting rural demand adversely: India is witnessing agricultural distress because of multiple factors like lack of easy credit, the declining average size of farm holdings, poor policy, and planning, etc.

A slowdown in the Indian industrial sector: Indian industrial sector is facing slowdown driven by disruptive technologies, changes in consumer behaviour, changing global industrial scenario, etc.

Structural growth slowdown in the Indian Economy: India is facing a long-term, deep-rooted economic slowdown which would require the government to undertake some structural policies like economic reforms of 1991.

Index of Industrial Production

The Index of Industrial Production (IIP) is an index that shows the growth rates in different industry groups of the economy in a fixed period of time.

It is compiled and published monthly by the Central Statistical Organization (CSO), Ministry of Statistics and Programme Implementation.

IIP 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.

The eight core industries of India represent about 40% of the weight of items that are included in the IIP.

Significance of IIP :

IIP is the only measure on the physical volume of production.

It is used by government agencies including the Ministry of Finance, the Reserve Bank of India, etc, for policy-making purposes.

IIP remains extremely relevant for the calculation of the quarterly and advance GDP estimates.

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