New Delhi: In a move aimed at improving the accuracy of India’s industrial data, the Ministry of Statistics and Programme Implementation (MoSPI) has proposed a major change in the methodology used by the Index of Industrial Production (IIP), one of the country’s key economic indicators of industrial output.
Released monthly by the ministry, the IIP measures short-term changes in the volume of industrial output in India, thereby serving as a key indicator of activity in the mining, manufacturing and electricity sectors.
In a discussion paper released Tuesday, MoSPI has suggested replacing factories, which have shut shop or factories that have changed their production line, with working or active factories in the existing sample of the industrial index.
According to the paper, the current industrial index series relies on a fixed panel of factories selected during the 2011-12 base year. Once selected, these factories continue to be part of the index even if they cease operations, leading to misrepresentation of data. According to the paper, the closed factories have a weightage of 8.9 percent in the industrial index.
“Continuing with factories that are no longer operational or no longer represent actual production leads to increased dependence on estimation or imputation methods,” the paper states.
In the discussion paper, the ministry proposes to substitute these defunct factories in the sample with active or working factories producing similar output or products. This is expected to prevent sudden breaks in the data and improve the reliability of month-on-month comparisons.
A factory would be substituted if it reports zero production for three consecutive months or does not report production data for three continuous months.
The revised methodology is currently open to feedback until 25 November from state governments, industry bodies, researchers and the public before being implemented in the new IIP series with base year 2022-23 expected to release in April 2026.
With the proposed change, the revised series with a new base year would ensure consistency and more accurate representation of India’s industrial health.
According to the paper, the industrial data for the index is currently being sourced from 14 agencies across 407 products related to the mining, manufacturing and electricity sectors.
The discussion paper is part of a wider effort by MoSPI to modernise India’s statistical reporting. Apart from IIP, the ministry is also undertaking revision of base year for gross domestic product (GDP) to 2022-23 (previously 2011-12) and consumer price index (CPI) to base year 2024 (previous base year was 2012).
(Edited by Viny Mishra)
Also read: How mining, manufacturing & power sectors weighed on India’s industrial output since January 2024