Ministry of Finance states that the data on the Index of Industrial Production (IIP) for August 2015 and Consumer Price Index (CPI)-New Series in September 2015 point towards steady improvement in the Indian economy.
The August 2015 IIP growth has registered an increase of more than 6 per cent after 34 months. Cumulative IIP growth in the first five months in 2015-16 at 4.1 per cent is better than the growth of 3 per cent in the same period last year.
Manufacturing sector growth at 6.9 per cent in August 2015 has spearheaded industrial production. Double digit growth in capital goods (21.8 per cent) and consumer durables (17 per cent) in August 2015, helped of course by a favourable base effect, imply improvement in investment and consumption demand.
Industrial growth data is a reflection of recovery in the economy, predominantly led by domestic demand as the external sector environment continues to be sluggish.
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WHAT IS IIP ?
Comparison of economic performance over time is a key factor in economic analysis and a fundamental requirement for policy-making. Short-term indicators play an important role in this context by providing such comparison indicators. Among these short-term indicators, the Index of Industrial Production (IIP) has historically been one of the most well known and well-used indicators.
The IIP measures volume changes in the production of an economy, and therefore provides a measurement that is free of influences of price changes, making it an indicator of choice for many applications.
The all India IIP is a composite indicator that measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to that in a chosen base period. It is compiled and published monthly by the Central Statistics Office (CSO) with the time lag of six weeks from the reference month.
Strictly speaking, the IIP is a short -term indicator of industrial growth till the actual results from Annual Survey of Industries (ASI) and National Accounts Statistics become available. This indicator is of paramount importance to the Government for policy planning purposes and is also being extensively used by various organizations including Industrial Associations, Research Institutes and Academicians.
ORIGIN OF IIP
In India, the first official attempt to compute the IIP was made much earlier than even the recommendations on the subject at the international level. The Office of the Economic Advisor, Ministry of Commerce and Industry made the first attempt of compilation and release of IIP with base year 1937, covering 15 important industries, accounting for more than 90% of the total production of the selected industries.
The all-India IIP is being released as a monthly series since 1950. With the inception of the Central Statistical Organization in 1951, the responsibility for compilation and publication of IIP was vested with this office.
The IIP series in India has been revised from time to time shifting the comparison base to a recent period, by reviewing the coverage of items and industries and by improving, as far as practicable, with a view to reflect adequately, the industrial growth and structure. When the index was commenced in India, the base year adopted was 1937 and this was revised successively to 1946, 1951, 1956, 1960, 1970, 1980-81, 1993-94 and 2004-05.
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LATEST REVISION
In the 7th meeting of Standing Committee on Industrial Statistics (SCIS) (present composition of the SCIS is at held on 12th July, 2002, it was decided to undertake the revision of base year of current-I series of IIP from 1993-94 to 1999-2000.
A Sub-group under the Chairmanship of Prof. C. P. Chandrasekhar was constituted to deal with the technical and operational aspects of revision of the IIP.
The National Statistical Commission (NSC), in its meeting held on 21st November 2008, recommended revision of base year of IIP to 2004-05.
The government will also be revising the base year for consumer price index (CPI), wholesale price index (WPI) and index of industrial production (IIP).
The new series of IIP and WPI are likely to be released by March 2016. The growth in the new series of IIP and WPI would be incorporated in the provisional estimates of 2014-15, to be released in May 2016.
The National Statistical Commission has suggested that the base year for computing national account should be revised every five years.
The base year of the national accounts is changed periodically to take into account the structural changes which take place in the economy and to depict a true picture of the economy through macro aggregates.
The first official estimates of national income were prepared by the Central Statistical Organisation (CSO) with base year 1948-49 for the estimates at constant prices.