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Why in news?

India’s factory output accelerated 4.5% in February in comparison to the previous year.

The growth in the Index of Industrial Production came on the back of higher output in mining, electricity and manufacturing sectors, according to the data released by the National Statistical Office on 9th April 2020.

Details of Growth

  • The cumulative growth for the financial year so far, from April to February 2019-20, stands at 0.9%
  • February saw the second straight month of improved industrial output after a contraction in December 2019.
  • The mining sector saw a robust 10% growth in production in February, while the electricity sector saw 8.1% growth in comparison to the previous year.
  • Manufacturing sector output grew more cautiously, at a rate of 3.2%.
  • In terms of industries, 13 out of 23 groups in the manufacturing sector showed positive production growth in February 2020.
  • Industries manufacturing basic metals saw the highest output growth of more than 18%, while chemicals manufacturing saw production rise 8%.
  • Primary goods saw output grow more than 7% and intermediate goods grew over 22%, the data showed.

Industries that slumped

  • The auto sector saw a major slump in February 2020, with the manufacture of motor vehicles, trailers and semi-trailers contracting 15.6%.
  • Computer and electronics manufacturing output also saw negative growth of almost 15%.
  • Overall, capital goods contracted almost 10%, while consumer durables saw negative growth of 6.4%.

What to Expect?

The IIP is likely to plunge drastically again for March, due to the lockdown caused by the COVID-19 pandemic, which has resulted in a halt in most business.

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
February 2024