India’s industrial output grew by 11.5% in July compared to a 10.5% contraction a year ago, as per quick estimates from the National Statistical Office (NSO).

Important points:

  • Mining, manufacturing and electricity recorded growth of 19.5%, 10.5% and 11.1%, respectively, albeit driven by favourable base effect.
  • The country’s output of the eight core sectors – also known as the infrastructural output, grew 9.4% in July 2021.
  • The index substantially bridged the gap with the pre-pandemic level and remained only marginally lower than the July 2019 mark, suggesting a graded pick-up in industrial activities with the easing of curbs in key states as the Second Covid Wave waned.
  • This recovery is owing to the result of the Base Effect due to the Covid-19 lockdown that affected economic activity in 2020.
  • The base effect refers to the effect that the choice of a basis of comparison or reference can have on the result of the comparison between data points.

Index of Industrial Production:

  • IIP is an indicator that measures the changes in the volume of production of industrial products during a given period.
  • It is compiled and published monthly by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.
  • It 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 Basic Goods, Capital Goods, and Intermediate Goods.
  • Base Year for IIP is 2011-2012.

Significance :

  • It is used by government agencies including the Ministry of Finance, the Reserve Bank of India, etc, for policy-making purposes.
  • IIP remains extremely relevant for the calculation of the quarterly and advance GDP (Gross Domestic Product) estimates.

Eight Core Sectors:

  • These comprise 40.27% of the weight of items included in the Index of Industrial Production (IIP).
  • The eight core sector industries in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.


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