Introduction to Index of Industrial Production (IIP)
IIP, as an index, tracks and reflects changes in the volume of production in key Indian industries.
Different industries are attributed distinct weights and the resultant index is accepted to be indicative of the economy’s industrial health.
Key sectors covered by the index include manufacturing, mining, electricity, primary goods, intermediate goods, consumer durables & non-durables, infrastructure and capital goods.
The index is considered important as an economic indicator helping capital market and economic participants in decision making.
Update: IIP Reading – May 2021
IIP grew of 22.4% in March’21 courtesy of low base effect, leading to it recording its highest figures since the imposition of lockdown last year. This comes against two continuous contractions in the months prior.
The last twelve-month period data shows contraction in industrial sector of 8.6%, vs 0.8% fall in the corresponding period a year ago.
Analyst Commentary
India’s road to economic recovery is laden with more bumps than previously expected as it consolidates with diverse undercurrents across different segments. The bouts of recovery are met with doubts of the unforeseen as Asia’s third largest economy faces uncertainty amidst a second wave of coronavirus. Vaccination diplomacy is key in printing problems and solutions to India Inc’s health & wealth. Here is an element-wise breakup of key factors devising the IIP index:
The expansion in IIP was primarily driven by manufacturing and electricity in a disproportionate manner vis-à-vis third element in mining (also recording positive figures). The rise in the manufacturing sector was broad-based, with 20 of the 23 sub-groups reporting growth in production levels. The rise in the index comes on the back of the rise in ei ght core industries, recording its growth at its fastest pace in last thirty-two months.
Recurring growth across consumer goods is reflective of demand revival amidst new lockdown fears. The growth in capital goods production is a direct result of India’s efforts to revive economy via infra-oriented policies and packages. However, this may be short-lived if corona count continues to grow.
IIP numbers highlight the nascent and fragile stage of recovery that the Indian economy was in.
We continue to keep an eye on efficient implementation of public policies which can be expected to bolster the economy at large. Resurgence of health risks in fragmented pockets of the nation, disrupted supply-side economics and overtly cautious retail consumption continue to be prominent risks to India’s full-blown economic recovery.
Click Here to read MoSPI’s original press release on ‘Quick estimates of index of industrial production and use-based index for the month of March, 2021’
