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Q. Index of Industrial Production: Outline the current status of Index of Industrial Production in India.
Apr 14, 2016 Related to : GS Paper-3

Ans :

Introduction-

Index of Industrial Production -

Index of Industrial Production (IIP) is an index which outlines the growth of various sectors in an economy such as manufacturing, mining, and electricity. The all India IIP is a composite indicator that measures the short-term changes in the volume of production of a basket of industrial products during a given period of time. It is compiled and published monthly by the Central Statistical Organisation (CSO) six weeks after the reference month ends.

IIP is composed of 682 items comprising 620 from Manufacturing, 61 from Mining & Quarrying and 1 from Electricity Sector having weightage of about 75%, 15% and 10% respectively in the all-India IIP. Base year for calculation of IIP is 2004-05. The level IIP is an abstract number, hence it does not show volume of activity and only shows the magnitude which represents the status of production in the industrial sector in given period of time.

Current Status of IIP-

Recently CSO has released the estimates of IIP for February. After three months of contraction, industrial output grew 2% in February due to strong performance by mining and electricity sectors. According to data, during February, mining, manufacturing and electricity sectors grew 5%, 0.7% and 9.6%, respectively.

Analysis-

Though 2% industrial growth came as relief due to previous three months contradiction, but the marginal recovery is unlikely to bring much cheer. Industrial growth for the first 11 months of 2015-16 is now estimated at 2.6% and it now seems that industrial growth for the full year will not be any better than the 2.84% of the previous year.

Mining and electricity, with a combined weight of over 24.5% in the overall index played crucial role in 2% growth of IIP for February. But the manufacturing sector, with a weight of 75.5% in the index, continued to remain sluggish with just 0.7% growth. Though the manufacturing sector also broke the trend of contracting for three previous months, the marginal rise revealed that a sustained industrial revival was still a challenge.

Conclusion-

These IIP numbers are showing the deeper problems that are still facing in the industrial sector. The emphasis of increasing investments has to be more focussed. The government should build consensus with opposition to get key bill passed in parliament like goods and services tax and the bankruptcy code, which should improve business sentiment.


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