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News Analysis

Important Facts For Prelims

Core Sectors Output

  • 02 Aug 2021
  • 3 min read

Why in News

Output at India’s eight core sectors grew by 8.9% in June 2021 largely due to Base Effect but the pace remained below the production levels seen before the Covid-19 pandemic as well as its second wave.

Key Points

  • About Eight Core Sectors:
    • These comprise 40.27% 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.
  • Base Effect:
    • The base effect refers to the effect that the choice of a basis of comparison or reference can have on the result of the comparison between data points.
    • For example, the base effect can lead to an apparent under- or overstatement of figures such as inflation rates or economic growth rates if the point chosen for comparison has an unusually high or low value relative to the current period or the overall data.
    • Production of coal, natural gas, refinery products, steel, cement and electricity jumped by 7.4%, 20.6%, 2.4%, 25%, 4.3% and 7.2%, respectively, in June 2021, as against (-) 15.5%, (-) 12%, (-) 8.9%, (-) 23.2%, (-) 6.8% and (-) 10% in the same month last year.
  • Index of Industrial Production:
    • IIP is an indicator that measures the changes in the volume of production of industrial products during a given 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.
      • IIP remains extremely relevant for the calculation of the quarterly and advance GDP (Gross Domestic Product) estimates.

Source: TH

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