Weight of mfg & electricity set to rise in new IIP series, mining to fall

NEW DELHI: The index of industrial production (IIP), which is moving to a chain-based series with annual resets, is also expected to see an increase in the weights assigned to electricity and manufacturing, while weightage for mining is set to decrease. This is part of the overhaul of the key dataset that the statistics office has planned along with a new base year, which will be updated to 2022-23 from 2011-12.

The ministry of statistics and programme implementation will release the updated series on May 28, an official told TOI.

In new series, the weight for electricity will rise to 11.5% from nearly 8% in the current series, which has 2011-12 as the base year. The weight of manufacturing will go up to 79% from 77.6% in the current series. The weight assigned to mining is set to fall to about 11% from 14.4% now.

"Growth in electricity GVA (which also includes gas and water supply) has outstripped growth in mining GVA in the past decade. The new IIP series is bound to reflect these changes happening in the production pattern," says IDFC First Bank chief economist Gaura Sengupta.

IIP is a key high frequency indicator, which measures short-term changes in volume of production in Indian industries and provides insight into the growth or contraction of industrial activity. The statistics ministry is currently undertaking the base year revision of IIP, along with other macro-economic indicators like consumer price index (CPI) and GDP.

The new IIP series is set to be chain-based, which means that the sectoral and industry weights in the index will undergo annual revision, as against the current practice of using the fixed base year, which is unable to capture entirely new industries or production lines within an industry, until the base year is revised. This is expected to better reflect the changes taking place in the sector.

"In the fixed base methodology frame, it is difficult to account for factories that shut down or new firms that emerge due to change in the composition of the economy. Chain basing allows for frequent revisions in the frame. Although, comparability becomes an issue in this," says former National Statistical Commission (NSC) acting chairman P C Mohanan.

Manufacturing, which accounts for nearly fourth of the IIP will also see a shift in the weighs of several industries within it, reflecting the change in the industrial production landscape. Industries like pharmaceuticals, rubber, motor vehicles, beverages, food products, and chemicals will see an increase in weightage in new series. Industries linked to printing and reproduction of recorded media, manufacture of coke are expected to shed their weightage.