Index of Industrial Production (IIP)

Index of Industrial Production (IIP)

Context

The Index of Industrial Production (IIP) is a key high-frequency macroeconomic indicator that captures short-term changes in the volume of industrial production in India. In late 2025, the Ministry of Statistics and Programme Implementation (MoSPI) confirmed that a new IIP series with base year 2022–23 will be released in May 2026. The revision aims to reflect post-pandemic structural changes and the emergence of new industries such as digital manufacturing and electric vehicles.

About the Indicator

Definition
 A composite index that measures growth in production volume across the industrial sector, acting as a real-time proxy for industrial performance.

Significance

• Policy Tool: Used by the Reserve Bank of India and the Ministry of Finance for monetary and fiscal policy decisions.
   
• GDP Input: Forms a core input for estimating Quarterly Gross Value Added (GVA) of the manufacturing sector.
   
• Economic Barometer: Signals trends in employment generation, capacity utilisation, and capital investment.
   

Key Features of IIP

• Publishing Authority: Compiled and released monthly by the National Statistical Office (NSO) under MoSPI.
   
• Release Lag: Approximately six weeks (e.g., November data released in mid-January).
   
• Base Year:
   
  • Current: 2011–12 = 100
     
  • Proposed: 2022–23 (from May 2026), to capture GST-era reforms and Covid-19-induced structural shifts.
     

Classification of IIP

1. Sectoral Classification

• Manufacturing: 77.63%
   
• Mining: 14.37%
   
• Electricity: 7.99%
   

2. Use-Based Classification

• Primary Goods: 34.05%
   
• Intermediate Goods: 17.22%
   
• Consumer Non-Durables: 15.33%
   
• Infrastructure / Construction Goods: 12.34%
   
• Consumer Durables: 12.84%
   
• Capital Goods: 8.22%
   

Index of Eight Core Industries (ICI)

The Index of Eight Core Industries (ICI) tracks performance of critical infrastructure sectors that act as inputs for the broader industrial economy.

• Weight in IIP: 40.27%
   
• Data Release Authority: Office of the Economic Adviser, Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry.
   

Eight Core Sectors (by descending weight):

1. Refinery Products (~28.04%)
    
2. Electricity (~19.85%)
    
3. Steel (~17.92%)
    
4. Coal (~10.33%)
    
5. Crude Oil (~8.98%)
    
6. Natural Gas (~6.88%)
    
7. Cement (~5.37%)
    
8. Fertilisers (~2.63%)
    

Way Forward

• Digital Integration: Proposed inclusion of a Service Output Index by 2026 to complement IIP and capture digital services and tourism.
   
• Methodological Upgrade: Alignment with System of National Accounts (SNA) 2025 for improved global comparability.
   
• Real-time Data Use: Leveraging GSTN filings to enhance accuracy and timeliness of production estimates.

Conclusion

The IIP functions as India’s industrial pulse, offering policymakers and investors a timely snapshot of economic momentum. The upcoming 2026 revision is expected to make the index more representative of contemporary production realities, ensuring its continued relevance in a rapidly transforming industrial and digital economy.