IIP - ECONOMY
News: India’s
core sector growth slows to 0.1% in October
What's in the news?
● India’s
eight core sector's output growth virtually
flattened in October, stumbling to just 0.1% from 7.8% in September, with
cement and refinery products slipping into contraction and electricity
generation rising just 0.4%.
Key takeaways:
● In
what analysts reckoned was the weakest
core sector's performance since February 2021, partly driven by base
effects, steel output rose 4% in
October, reflecting the slowest growth since this July, while coal and fertilizer production grew
3.6% and 5.4%, respectively.
● Cement production
fell 4.3% compared with October 2021 and was also 2.4% below the September 2022
output.
● Coal,
fertilizers, cement and electricity had clocked double-digit output growth in
September.
● The Index of Core
Industries released by the Commerce and Industry Ministry,
which constitutes about 40% of the Index of Industrial Production (IIP), was
unchanged month-on-month at 138, signaling a flat sequential trend as well.
● Natural
gas production shrank for the fourth successive month, by 4.2% in October, the
sharpest decline in at least 12 months.
● Crude
oil output dipped for the fifth month in a row, but the contraction was the
lowest in four months at 2.2%.
IIP:
● IIP
is a composite indicator measuring changes in the volume of production of a
basket of industrial products over a period, with respect to a chosen base
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 of IIP:
● It
is used by government agencies including the Ministry of Finance, the Reserve
Bank of India, etc, for policy-making purposes.
● IP
is the only measure on the physical volume of production.
● It
forms a crucial input for compilation of
Gross Value Added (GVA) of the manufacturing sector in the Gross Domestic
Product (GDP) on a quarterly basis.
● IIP
remains extremely relevant for the calculation of the quarterly and advance GDP
estimates.
● It
is also used extensively by financial intermediaries, policy analysts and
private companies for various analytical purposes.
Eight Core Sectors:
● These
comprise 40.30% 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.