Revision of base year of Index of Industrial production
Context:
The Government of India has constituted a committee to revise the base year for the Index of Industrial Production in order to make it updated in accordance with the market trend.
UPSC Relevance:
PYQ:
Q. With reference to Index of Eight Core Industries (ECI), consider the following statements:
- The Eight Core Industries comprise 60 percent of the weight of items included in the Index of Industrial Production (IIP).
- It is prepared by the Central Statistical Office, Ministry of Statistics and Program Implementation.
- Electricity generation is given the highest weightage in the ECI.
How many of the above statements is/are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
Why is the base year being revised?
- With a more market-oriented economy, the need for quick and symmetric information has grown.
- Therefore, the statistical system must adapt to capture full and correct information of the economy.
Key Improvements:
- Expansion of scope, coverage: Revision of item-basket to capture obsolescence as well as innovations, by dispensing with several once-relevant products.
- Inclusion of ‘not elsewhere classified’ items by assigning relevant weightage to them.
- Substitution of factories by introducing a systematic methodology for substituting factories that have shut down or altered production lines.
- Seasonally – adjusted series to put in place a system to additionally provide a de-seasonalized index, in line with the international practice.
About the Index of Industrial Production (IIP):
- The Index of Industrial Production (IIP) is a key statistical tool used to measure the short-term changes in the volume of production in Indian industries.
- It provides insight into the growth or contraction of industrial activity over a given period, making it a crucial economic performance indicator.
- The IIP is published by the Central Statistics Office (CSO), which is part of the Ministry of Statistics and Programmer Implementation (MoSPI).
- The current base year for the index is 2011–12. This base year was adopted to reflect modern industrial structure and production patterns, following periodic revisions from earlier base years such as 1937, 1946, 1951, 1956, and so on.
- Sectoral Composition of IIP (Weight-wise):
- Manufacturing: 77.63% of total weight (809 items)
- Mining: 14.37% (29 items)
- Electricity: 7.99% (1 item)