DDI-IND-CSO-IIP
Index of Industrial Production (IIP) with Base year 2011-12
Comparison of economic performance over time is a key factor in economic analysis and a fundamental requirement for policy-making. Short-term indicators play an important role in this context by providing such comparison indicators. Among the short-term indicators, the Index of Industrial Production (IIP) has historically been one of the most well-known and well-used indicators. 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 with respect to that in a chosen base period. It is compiled and published monthly by the Central Statistics Office (CSO) with a time lag of six weeks from the reference month.
Frame for coverage of units is decided by the source agencies which collect data from the factories. For compilation of IIP both large and medium factories are covered for collection of data by the source agencies.
Industrial Coverage: Although UNSD guidelines state that IIP is to be compiled for activities in ISIC Rev. 4 Sections B, C, D and E, i.e. (i) Mining and quarrying, (ii) Manufacturing, (iii) Electricity, Gas, Steam and Air-conditioning supply and (iv) Water supply, Sewerage, Waste management and Remediation activities, due to constraints of the data availability and other resources, the index is being compiled with (i) Mining, (ii) Manufacturing and (iii) Electricity as scope of All India IIP. In the current base year (i.e. 2011-12), the index covers 839 items clubbed into 407 item groups under three sectors i.e. Mining (29 items clubbed into 1 item group), Manufacturing (809 items clubbed into 405 item groups) and Electricity (1 item) with weights of 14.37%, 77.63% and 7.99% respectively.
The mining sector covers 29 items under different headings viz. Fuel Minerals, Metallic Minerals and Non-Metallic Minerals. This sector also includes Crude Petroleum, Natural Gas, Coal and Lignite. The manufacturing sector covers 809 items under different groups e.g. Food products, Beverages, Textiles, Chemicals and chemical products etc. The Electricity sector is treated as a single item.
Product Coverage: Within an industry the products are covered on the basis of the concepts of Primary (Main) Product as well as Secondary (By) Product. All those items which represent at least 80% of the output within each industry group, i.e., 3-digit industry of NIC-2008 (based on ISIC 4) have been included in the Item basket. Essential products like tea, coffee, salt and sugar have been included. The over-riding criteria for finalization of item basket have been the regular monthly flow of
production data from the source agencies/collection authorities.
The weights for the three sectors (mining, manufacturing, and electricity) are based on share of the sector in total domestic production in the base year. The overall weight of the
manufacturing sector is apportioned to the industry groups at the 2-digit, 3-digit- and 4-digit level of the National Industrial Classification (NIC) 2008, on the basis of the Gross Value Added (GVA). The weighting diagram for the current series of IIP is prepared on the basis of GVA up to the 2-digit, 3 and 4 digit level of NIC based on the results of ASI 2011-12. At the final level (i.e. 5 digit level of NIC), weights to items have been distributed on the basis of Gross Value of Output (GVO). The weights of selected items within an industry group are apportioned on the basis of the value of output. Period of Current Index Weights: The current index weights are based on the value of production of the industries during the base year period viz. April, 2011 to March 2012 as reported in the Annual Survey of Industries for the year 2011-12. The same weights are used until the revision of the base year is done.
Frequency of Weight Updates: The weights are revised with every revision of the base year. The base year was revised to 2011-12 from 2004-05 in May 2017. Efforts would be made to revise the base year once in every five years as per UNSD's recommendations (the previous base years of the index were 2004-05, 1993-94, 1980-81, 1970, 1956, 1951
and 1946).
-- Computation of lowest level indices: The lowest level, for which an index is prepared, is the item group. It is compiled as the ratio of production quantity in the current month with
respect to its average monthly production quantity in the base year.
-- Aggregation: The IIP is calculated using the Laspeyres formula as a weighted arithmetic average of production relatives. The index is primarily quantity based, although for some
item groups the quantity relatives are obtained by price deflation.
The index at group level/ 2-digit level of NIC is compiled by using the Laspeyeres' formula, i.e.: I =uppercase sigm (Wi*Ri)/ uppercase sigm(Wi) where Ri is the production relative and Wi is the weight of an item. The index is prepared for each two-digit level of NIC. Also the index is prepared on the basis of the following use-based classification: Primary Goods, Capital Goods, Intermediate Goods, Infrastructure/ Construction Goods, Durable Consumer Goods and Non-Durable Consumer Goods.
-- Alignment of Value of Weights and Base Period: No alignment of the weights is required as the weights as well as the base year production relate to the same reference period viz. April, 2011 to March 2012.
-- Linking of Re-weighted Index to Historical Index: Whenever there is change in the base year, the new series can be linked with the old series by preparing linked series. For the common period, the index series are available with both old weights & new weights for linking the two series.
-- Reference Period: The reference period for the current index of industrial production in India is 2011-12, when the index=100.
-- Seasonally Adjusted Indices: Not being done at present.
Frame for coverage of units is decided by the source agencies which collect data from the factories. For compilation of IIP both large and medium factories are covered for collection of data by the source agencies.
DDI-IND-CSO-IIP
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