Index of Industrial Production

Why in news:

India’s industrial growth (as measured by the Index of Industrial Production or IIP) slowed down to a 10-month low of 1.5% in June 2025, compared to 1.9% in May 2025. This is a significant economic indicator showing weakness in industrial momentum.

UPSC CSE Relevance:

This article is relevant for GS Paper III (Indian Economy) as it highlights trends in industrial growth and sectoral performance under the Index of Industrial Production (IIP). It aids in understanding economic slowdowns, structural issues in key sectors like mining and electricity, and their implications on policy and planning.

UPSC CSE PYQ 2015:

In the ‘Index of Eight Core Industries’, which one of the following is given the highest weight?

A. Steel production

B. Coal production

C. Electricity generation

D. Fertilizer production

About IIP:

•  The Central Statistical Organisation (CSO) is responsible for the compilation and publication of the Index of Industrial Production (IIP) since 1950. 
• It measures the change in industrial production in an economy.
• Published monthly by the Central Statistics Office (CSO).
• The base year for this is 2011–12.

Categorization Of IIP:

Sectoral based:

• Mining
• Manufacturing
• Electricity.

Note: Highest weightage-Manufacturing. 

Use base Classification:

Note: Highest Weightage-Primary goods

Primary Goods:- Primary goods are goods that are directly obtained from natural sources. They are primarily used for further processing or direct consumption.

Examples: Ores and Minerals and Electricity

Capital goods: Plants, machinery and goods used for further investments. E.g.: Boilers, Air & Gas Compressors, Engines including Internal Combustion and Diesel Engine, Tractors (complete), Transformers, Commercial Vehicles and all machineries like Textile Machinery, Printing Machinery etc.

Intermediate goods: Any good/ product produced as incomplete product or which goes as input in production for further finishing or forming a part of a product. E.g.: Cotton yarn, Plywood, Steel Tubes/ Pipes, Fasteners, etc.

Infrastructure/ construction goods: Finished goods which are primarily used in infrastructure industry or construction industry as an input. This category has been created to precisely categorise items which could not be classified under Consumer durables or Intermediate goods. E.g.: paints, cement, cables, bricks and tiles, rail materials, etc.

Consumer durables: Products directly used by consumers and having a longer durability (more than 2/3 years). E.g.: Pressure Cooker, Air Conditioners, Tyres, Telephone and mobile instruments, TV Sets, Passenger cars, Two-wheelers (motorcycles/ scooters), Jewellery of gold etc.

Consumer non-durables: Products that are directly used by consumers and can’t be preserved for long periods. E.g.: Soyabean Oil, Full-cream/ Toned/ Skimmed milk, Milk Powder, Maida, Rice, Biscuits/ cookies, Sugar, Tea, Cigarettes, etc.

Eight Core Industries:

The Index of Eight Core Industries evaluates the collective and individual performance of selected key industries in terms of production.

• The eight core industries, in descending order of their weight: Refinery Products (28.04%) > Electricity (19.85%) > Steel (17.92%) > Coal (10.33%) > Crude Oil (8.98%) > Natural Gas (6.88%) > Cement (5.37%) > Fertilizers (2.63%)
• These eight major industries account for 40.27% of the items included in the Index of Industrial Production (IIP).
• The index is compiled and published by the Office of the Economic Adviser (OEA) under the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, Government of India.

Practice Question:

Which of the following have the highest and lowest weight among the eight core industries?

a) Coal, Electricity
b) Cement, Steel
c) Refinery Products, Fertilizers
d) Crude Oil, Natural Gas