IIP History

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About Index of Industrial Production in India

Index of Industrial Production or I. I. P. is the abstract number. As compared to the referred time period, the magnitude of such an abstract number represents production status of the varied industrial sectors of an economy in a specified time period. This is a kind of statistical device that helps us in measuring the activity level in terms of industries, which a given economy is comprised of. It is an indicator, which measures the industrial growth until the actual detailed report of the industrial surveys is available. Being of high importance, this indicator is used by many organizations that include the different departments as well as the ministries of the Government of India, research institutes, industrial associations and academicians.

History of India Index of Industrial Production

This country made the 1st official attempt of computing the Index of Industrial Production on a regular basis much before it was recommended by the UNSO (United Nations Statistical Office) at an international level. Keeping the base year as 1937, the first attempt to compile as well as release IIP was made by the Office of Economic Advisor under the Commerce and Industry Ministry of the Indian Government. During that time, 15 major industries that accounted for above 90 % of the entire production were taken into consideration. Later, the base year was revised twice, once in the year 1946 and another in 1951. Post independence of India, with the introduction of CSO (Central Statistical Organization) in the year 1951, this office was made responsible for the compilation and release of IIP in India. As per the recommendations made by the UNSO, IIP's general scope included sectors like construction, electricity, manufacturing, mining and gas. However, due to the constraints in the availability of the required data, the current general index is compiled in the country on the basis of manufacturing, mining and electricity sectors.

With time, the changes in the industrial structure necessitate the periodical revision of IIP for the measurement of the actual growth of this sector. UNSO recommends the revision of the base year to be done once every 5 years. The revision of the same has been done from time to time by the following methods:

  • Improving the construction technique, as much as possible, from a practical point of view
  • Reviewing the industries' as well as items' coverage
  • Shifting of the base of comparison to a recent time
Though initially the base year was fixed at 1937, but later it was amended successively to the years like 1946, 1951, 1956, 1960, 1970, 1980 - 1981, 1993 - 94 and 2004 - 2005. The latest base year is fixed at 2004 - 2005.

Year wise highlights of India's IIP

Let us have quick look at the major focusing points of the country's Index of Industrial Production since the year 1937:

Base Year 1937
Apart from the 15 industries, which is responsible for the 90 % of the total industrial production, the allocation of weights were done based on the total output value during this base year. During that time, the quantum index was termed as the "Interim Index of Industrial Production".

Base Year 1946
With the shifting of the base year to 1946, the scope of the IIP got restricted to manufacturing and mining sectors, which comprised of 20 industries and 35 items.

Base Year 1951
The discontinuation of the Interim Index of Industrial Production took place in the month of April in 1956. This happened because of some shortcomings and was, thus, replaced by a revised index that fixed the base year to be 1951. This index covered 88 items as compiled by the Central Statistical Organization.

Base Year 1956
As suggested by the working group of the C. S. O., the base year was revised to 1956. During that time, as per the Census of Manufactures in 1956, the assignments of the weights were done on the ‘value added by manufacture's basis.

Base Year 1960
In the base year 1960, the index was based on the following:

  • Regular series for 312 items on a monthly basis
  • Annual series that included additional 124 items in comparison with the 201 items, which the previous index covered
Base Year 1970
During this base year, the manufacturing sector's weighting diagram stood on the report of the A. S. I. (Annual Survey of Industries), 1970. The estimation of the Indian Bureau of Mines in regards to the net value addition by the mining sector was used for this sector though.

Base Year 1980 - 1981
The continuous adoption of the 1970 base year made the India Government feel that calculation of the IIP of India is not reflecting the actual changes, which were taking place in the structure of the industrial sectors in India. This made the then Government form another Working Group during 1978. That group under the Chairmanship of the CSO's Director General, was supposed to suggest modifications in the prevalent weighting diagram as well as change the base year. Though initially that working group thought of keeping the base year at 1975 – 1976, but later they fixed it at 1980 – 1981 so that the accommodation of the items belonging to the small scale sector can be done adequately.

Base Year 1993 – 1994
During the CSO's attempt to revise the base year 1980 – 1981 to the new base year 1985 - 1986, an inter-ministerial meeting was held in the month of November, 1995, where the decision of calling off the revision of the base year was taken. Delayed implementation of the revised base year was the main cause of such a decision. Since, the ASI results of 1993 – 1994 was about to be available, they thought it better to adopt 1993 – 1994 as the base year then.

Base Year 2004 – 2005
With an aim of making the comparison of statistics easier as well as eliminating the data ambiguity, the nation has shifted its prime macro-economic indicators to the common 2004 – 2005 base year.

Last Updated on 1/13/2012