What is IIP?

Index for Industrial production, more popularly known as the IIP, denotes the industrial production during a period.

Government data on IIP is released every month, more towards the first half of the month. For example, if the IIP is 3 per cent, then factory output or factory production has grown by 3 per cent, compared to the previous month.

Who tracks the IIP data?

Generally, economists in India and stock market investors track the IIP data. The data released around 11 AM every month sees stocks markets turning volatile. A good positive data perks up sentiments in the stock markets, as improving industrial production means better profitability for corporates. And, ultimately profitability is what drives stock prices higher.

Calculating the IIP data

Currently, the index for industrial production uses 1993-94 as the reference year and includes items whose gross value of output is at least Rs 80 crores and Rs 20 crores at gross value added level. They are basically 3 sections that include the IIP and the are the manufacturing, mining and electricity. They are also classified on the basis of usage: capital goods, basic goods, non-basic goods, consumer durables and consumer non-durables.

IIP is one of the important figures watched by the RBI to see if industrial activity is improving. This helps the RBI to decide on interest rate cuts. For example, sharp deceleration in Industrail growth could prompt the RBI to cut rates.

IIP is compiled using data received from 16 source agencies viz. Department of Industrial Policy & Promotion (DIPP); Indian Bureau of Mines; Central Electricity Authority; Joint Plant Committee; Ministry of Petroleum & Natural Gas; Office of Textile Commissioner; Department of Chemicals & Petrochemicals; Directorate of Sugar; Department of Fertilizers; Directorate of Vanaspati, Vegetable Oils & Fats; Tea Board; Office of Jute Commissioner; Office of Coal Controller; Railway Board; Office of Salt Commissioner and Coffee Board.

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