Index of Industrial Production

The Index of Industrial Production (IIP) measures short-term changes in the volume of industrial output relative to a base period. India’s current series uses 2011-12 as the base year, set equal to 100, and covers mining, manufacturing and electricity.

Coverage and data collection

The National Statistical Office, under the Ministry of Statistics and Programme Implementation, compiles the IIP monthly from production data supplied by government agencies and designated data sources. The basket contains 839 items, grouped into 407 item groups, selected to represent organised industrial production.

• Mining output data are primarily sourced through the Indian Bureau of Mines, while electricity data come from the Central Electricity Authority.
• Manufacturing data cover selected products reported in physical quantities or suitable production measures by departments, public bodies and industrial establishments.

Index construction

For each item or item group, current production is compared with its average production in 2011-12 to obtain a production relative. These relatives are combined through a weighted arithmetic aggregation, with weights reflecting the relative importance of industries and products in the base year.

• The index primarily captures changes in the physical volume of production, rather than changes in prices or the monetary value of output.
• The sectoral weights are approximately 77.63 percent for manufacturing, 14.37 percent for mining and 7.99 percent for electricity.
• The general index is obtained by aggregating the sectoral and item-group indices using their assigned weights.

Classification and interpretation

The same production data are presented through sectoral and use-based classifications. The use-based categories are primary goods, capital goods, intermediate goods, infrastructure or construction goods, consumer durables and consumer non-durables.

• A value above or below 100 indicates output relative to the base year, while year-on-year growth compares an index value with the corresponding month of the previous year.
• IIP is a high-frequency indicator of industrial activity, but it is not identical to industrial gross value added because their coverage and methods differ.

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