IIP AND IT’S CORE SECTOR

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Context

India's core sector growth slowed to 4.3% in March after it grew 6.0% in February 2022- Ministry of Commerce and Industry data.

Index of Industrial Production

The Index of Industrial Production (IIP) is an index which shows the growth rates in different industry groups of the economy in a stipulated period of time.
More formally, it chooses a basket of industrial products — ranging from the manufacturing sector to mining to energy, creates an index by giving different weight to each sector and then tracks the production every month.
Finally, the index value is compared to the value it had in the same month last year to figure out the economy’s industrial health.
The IIP number measures the industrial production for the period under review, usually a month, as against the reference period.

Who releases Index of Industrial Production or IIP data?

The IIP is estimated and published on a monthly basis by the Central Statistical Organisation (CSO) .
As an all India index, it gives general level of industrial activity in the economy.

IIP base year/ Reference Period

The IIP base year was changed to 2011-12 from 2004-05 in the year 2017.
The earlier base years were 1937, 1946, 1951, 1956, 1960, 1970, 1980-81, 1993-94 and 2004-05.

Where is IIP data sourced from?

The CSO uses secondary data to reach the monthly IIP number.
The data is sourced from various agencies in different ministries or departments of the government.
The Department of Industrial Policy and Promotion (DIPP)is the source for the major chunk of data for the calculation.

Who uses IIP data?

The factory production data (IIP) is used by various government agencies such as the Ministry of Finance, the Reserve Bank of India (RBI), private firms and analysts, among others for analytical purposes.
The data is also used to compile the Gross Value Added (GVA) of the manufacturing sector in the Gross Domestic Product (GDP) on a quarterly basis.

Calculation of IIP:

IIP is a composite indicator that measures the growth rate of industry groups classified under,

Broad sectors, namely, Mining, Manufacturing and Electricity
Use-based sectors, namely Primary/Basic Goods, Capital Goods, Intermediate Goods, Consumer durables etc.

Core Industries in IIP

The main or the key industries constitute the core sectors of an economy.
In India, there are eight sectors that are considered the core sectors.
The eight industries have a combined share of 40.27 per cent in the Index of Industrial Production (IIP), which gives the growth rates of different industry groups in a specified period.
The eight-core sectors of the Indian economy are electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilizers.
These sectors have a major impact on the Indian economy and significantly affect most other industries as well.
The Office of Economic Adviser, Department for Promotion of Industry and Internal Trade releases Index of Eight Core Industries (ICI).

The Eight Core Industries in decreasing order of their Weightage:

Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers

Recent findings

India's core sector growth slowed to 4.3% in March after it grew 6.0% in February 2022.
The cumulative growth rate of Index of Eight Core Industries (ICI) stood at 10.4% during April-March 2021-22 compared to the same year in the previous fiscal.
The production of natural gas, refinery products, fertilizers, and steel, cement and electricity industries increased in March 2022 over the corresponding period of last year.
Six sectors including natural gas (7.6%), refinery products (6.2%), steel (3.7%), cement (8.8%), Fertilizers (15.3%) and electricity (4.9%) reported a growth in the month of March.
Coal and Crude oil sectors witnessed a contraction of 0.1% and 3.4% respectively this month on a year-on-year basis.
The fertiliser sector saw a growth of3% in March 2022 against a contraction of 5% seen in March 2021 and a contraction of 1.4% in February 2022.