IIP Full Form

What is the Full Form of IIP?

The Index of Industrial Production (IIP) is conceived of as a composite statistic that compares changes in the number of industrial items produced over a short period to a predetermined baseline time. India attempted to compute the IIP years before the first worldwide suggestion for IIP was made. With the founding of the country's Central Statistical Agency in 1951, the organisation gained responsibility for collecting and releasing the Index of Industrial Production. This association is also known as the National Statistic Office and represents the performance of eight key industries. The IIP index is used for policymaking by government institutions such as the Reserve Bank of India, the Ministry of Finance, and the Office of Economic Adviser (Department for Promotion of Industry and Internal Trade).

According to Central Statistical Organization (CSO), IIP is defined as a “Compound statistic that assesses the short-range variations in the quantity of production of a basket of manufacturing goods throughout a given time with regard to that in a selected base time duration”.

The IIP is a statistic that measures the success of several industrial sectors in the country's economy. CSO computes and publishes the IIP number once a month. It is also a composite indicator of the country's total level of industrial activity. This index measures the growth rates of the country's various industrial categories over a given or definite time or length. Economic growth and industrial health are derived by comparing the current month's IIP index value to the same month's value the previous year.

Components

The eight key sectors that account for almost 40% of the weight of commodities included in the IIP are electricity, crude oil, coal, cement, steel, refinery products, natural gas, and fertilisers. The three significant industries into which IIP members fall are mining, manufacturing, and power. Core industries are weighted in decreasing order as:

Refinery Products>Electricity Industry> Steel Industry> Coal Industry > Crude Oils> Natural Gas> Cement Industry> Fertilizers.

Importance

The IIP assists various organisations, agencies, corporations, and departments. The IIP is critical for assessing the Gross Value Added (GVA) in the manufacturing sector each quarter, making it a carefully watched index by financial experts, business analysts, private industry, and government organisations. Many government agencies and departments use the Index of Industrial Production to make policy decisions. It comprises the Reserve Bank of India, the Finance Ministry, and several other government institutions. Many businesses use the IIP index every three months to assess the GVA in the manufacturing sector. In addition, several private sector sectors, financial professionals, and business analysts are used for various functions. Furthermore, the Index of Industrial Production is useful for forecasting advanced GDP projections.

Growth of IIP

• In December 2020, a 1% increase was seen.

• In September 2019, the IIP index fell by 4.3% compared to September 2018.

• In other words, the IIP fell over the 2018-2019 fiscal year.

• Furthermore, after November 2012, the Mining, Manufacturing, and Electricity sectors (collectively known as board-based industries) decreased and had the lowest monthly growth rate during the 2011-12 base year succession.

• The most recent change to the IIP occurred in 2017.

• It is vulnerable to revisions such as changing the base year, including new goods in the basket, and various other adjustments.

• The most recent base year for the Index of Industrial Production is 2011-2012, up from 2004-05.

• Other changes included adding and deleting specific elements from its data series.

• Surgical auxiliaries, refined palm oil, and cement clinkers have all been added to the IIP basket. Chewing tobacco, fans, watches, pens, toothbrushes, and calculators were also eliminated from the IIP basket.

• It is the ninth base year reform since the Index of Industrial Production was initially published in 1950, using 1937 as the base year.

Outcomes

• In August 2021, the previously recorded exceptional IIP increase was 13%.

• In the first month (April) of the fiscal year 2022-2023, the manufacturing sector grew by 6.3%, the electricity sector by 11.8%, and the mining sector by 7.8%.

• According to use-based categorization, capital increased by 14.7%, while consumer durables production increased by 8.5%.

• Consumer non-durable output reflects consumers' cautious spending during periods of rising inflation.

• Furthermore, primary products accounted for 10.1% of total production, intermediate goods accounted for 7.6%, infrastructure goods accounted for 3.8%, and consumer non-durables accounted for 0.3%.

• The IIP rebounded and rose to a peak of 7.1% in April 2022 due to the low base of the second COVID wave.