Index of Industrial Production (IIP)
- 15 Nov 2019
- 3 min read
Why in News
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.