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Focus: GS-III Indian Economy

Why in news?

Official estimates of gross domestic product for the fiscal third quarter have pegged growth in the festival demand-filled October-November month  period at 4.7%, a distinct slowdown from the revised year-earlier and preceding quarters’ 5.6% and 5.1% paces respectively.

Growth of different sectors:

  • Manufacturing, which contributes just under a fifth to gross value added (GVA), was the biggest drag posting a 0.2% decline and extending the sector’s contraction into a second straight quarter.
  • Output at electricity and allied utility services also shrank 0.7%, reflecting lack of demand from becalmed factories.
  • And activity in construction, a generator of orders for goods from cement to steel, softened worryingly to a 0.3% expansion, prolonging the industry’s slowdown for a third consecutive quarter.
  • However, agriculture and the three largest services sectors, including public administration and defence, shored up overall GVA, with farm output expanding by 3.5% and the government-centred services growing by 9.7%, according to NSO estimates. 
  • The Centre was quick to assert that the economy appeared to have “bottomed out”, with the Economic Affairs Secretary citing an improvement in output at the eight core industries as an uptick in momentum.
  • To be sure, overall growth at the eight industries that include coal, refinery products, steel, cement and electricity averaged 2.2% in January, propelled by an 8% increase in coal production.

Note of caution: Don’t try to memorise these growth rate numbers. Just follow the growth pattern.

More about IIP

  • The Index of Industrial Production (IIP) is an index that shows the growth rates in different industry groups of the economy in a fixed period of time.
  • It is compiled and published monthly by the Central Statistical Organization (CSO), Ministry of Statistics and Programme Implementation.
  • IIP 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.
  • The eight core industries of India represent about 40% of the weight of items that are included in the IIP.

The Eight Core Sectors/Industries are:

  • Electricity
  • Steel
  • Refinery products
  • Crude oil
  • Coal
  • Cement
  • Natural gas
  • Fertilisers

Significance of IIP :

  • IIP is the only measure on the physical volume of production.
  • 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 estimates.

Core industries in the IIP

The following table represents the weight of the eight core industries in the IIP.

Industry Weight
Coal 10.33
Electricity 19.85
Crude oil 8.98
Cement 5.37
Natural gas 6.88
Steel 17.92
Refinery products 28.04
Fertilisers 2.63
Total 100
Q. In the Index of Eight Core Industries, which one of the following is given the highest weight?
(a) Coal Production
(b) Electricity generation
(c) Fertilizer Production
(d) Steel Production  

Ans: B
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