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What is IIP and why does it matter?

Why is it in News?

  • According to the data for the “Quick Estimates of Index of Industrial Production” released by the Ministry of Statistics and Programme Implementation (MoSPI) on Friday, India’s industrial sector production contracted by 1.1 per cent in August when compared to the production in the same month in 2018.

What is the IIP?

  • As the name suggests, the Index of Industrial Production (IIP) maps the change in the volume of production in Indian industries.
  • 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.

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Which sectors are lagging in production?

  • There are two ways in which IIP data can be viewed.
  • The first is to look at sectoral performance.
  • In this the whole industrial economy is divided into three sectors; the first is manufacturing with a weight of 77.6 per cent in the index, the second is mining with a weight of 14.4 per cent and third is electricity with a weight of 8 per cent.

How useful are monthly IIP figures to draw a conclusion about India’s growth?

  • IIP figures are monthly data and as such it keeps going up and down. In fact, the release calls them “quick estimates” because they tend to get revised after a month or two.
  • As such, it is true that one should not take just one month’s IIP data and project it for the whole year or indeed use it to conclude that the full year’s economic growth will be low.

Chiseled and Crafted by G.Rajput from Indian Express

Current Affairs 2020

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