Basics of IIP Data 

What is IIP data?

IIP number or IIP data is an index which measures the status of production in the industrial sector for a
given period of time compared to a reference period of time (base year). IIP number is one of the best
statistical data, which helps us to measure the level of industrial activity in Indian economy.

Index of Industrial Production has been a very important tool and indicator to show the performance of
the Indian industry. IIP data is a short-term indicator of our industrial growth till the actual results from
Annual Survey of Industries (ASI) is published. It is a very important indicator to the Government for
planning purposes and is also used by various organizations like Industrial Associations, Research
Institutes, Financial Institutes and Academicians.

Composition of IIP data

IIP data classifies the industries into two broad categories –

a) On the basis of sectors

a. Mining & Quarrying (10.47%)

b. Electricity (10.17%)
c. Manufacturing (79.36%)

b) On the basis of use

a. Basic Goods (35.5%)

b. Capital goods (9.2%)
c. Intermediate goods (26.5%)
d. Consumer Non Durables (23.2%)
e. Consumer Durables (5.3)

Problems in the quality of IIP data

Last month, RBI expressed concerns regarding high fluctuations in the IIP data and raised some doubts
about how effectively the index reflects the underlying momentum in the industrial sector. These are a
few limitations of the IIP data:-

i. The quality of monthly production data furnished by the major source agencies suffers from
substantial non-response on the part of manufacturing units.
ii. It is also observed that the source agencies do not adopt any standard estimation techniques for
estimating production of non-responded factories. In order to consider the production of the non
respondents, the agencies count either their production in previous month, or the same month in
the previous year, etc. But their method doesn’t remain consistent and keeps changing.
iii. In the above context, it may also be mentioned that as the frame of factories maintained by some
of the source agencies is not properly updated, it leads to the problem of over/under estimation of
item-wise production data
iv. It has been observed that in respect of some of the items included in the item basket of current
series of IIP, the number of producers is very low. In such cases the variation in monthly

EcoForum 2010 
  Basics of IIP Data 

production of the item by even a single factory leads to considerable fluctuation in the total
production of the item which results in sudden drop or spurt in the index for the particular month.

When is the IIP data published?

Usually IIP numbers of a particular month would be published after two months. The date of
publishing IIP numbers are usually before noon on the 12th of a month. The dates are indicative based on
the previous publishing dates, it can be anywhere between 11th to 14th of a month

IIP data and Stock Markets

Indian stock markets are very sensitive to IIP Numbers. A better IIP number would show a positive
growth on our Industrial production and share markets would possibly cheer. If IIP numbers are not as per
market expectations, as the situation which occurred today, the markets plummet, signaling a fall in
confidence of the investors.

Please find below a report by Crisil on the recent IIP data announced on 12th October. You could have a 
look at it to understand the concepts better. 

This was an effort made by Eco Forum 2010 to explain IIP data in simple terms. If you want to learn this
in depth, log on to http://mospi.nic.in/iip_report.htm for further details. Send us your valuable feedback at
ecocom@spjimr.org

EcoForum 2010 
Economy First Cut: Industrial growth volatile, slows down to 5.6 per cent in August 2010
12th October 2010

Industrial output growth (y-

(y-o-y, %)

20.0 • Industrial output continues to be volatile as

15.2
IIP growth came down to 5.6 per cent in
15.0
August 2010. The revised growth of July
10.0 2010 now stands at 15.2 per cent. IIP
6.2 growth in June 2010 was 5.8 per cent and in
5.0 5.6
5.8
May 2010 it was 11.5 per cent. The same
2.1
0.0
1.1
stood at 10.6 per cent in August 2009.

-5.0
Apr'08 Aug Dec Apr'09 Aug Dec Apr'10 August
• Although base effect played a role in
dragging the growth down in August 2010,
m-o-m momentum also lost ground.
Sector growth (y-
(y-o-y, %)

Apr-Aug • Manufacturing activity decelerated to 5.9

Weight Aug-09 June-10 July-10 Aug-10 FY10 FY11 per cent, as IIP manufacturing index
General 1000.0 10.6 5.8 15.2 5.6 5.8 10.6 dropped by 9 per cent on m-o-m basis.
Manufacturing 793.6 10.6 5.8 16.7 5.9 5.6 11.3
Mining 104.7 11.0 8.5 9.9 7.0 8.0 9.4
• Mining activity slowed to 7.0 per cent and
Electricity 101.7 10.6 3.5 3.7 1.0 6.5 4.3
Basic 355.7 7.7 3.1 5.2 3.7 6.2 5.8 electricity also grew at a slower rate of 1.0
Capital 92.6 9.2 -0.3 72.0 -2.6 3.4 29.0 per cent.
Intermediates 265.1 14.4 8.9 9.2 10.0 9.3 9.9
Consumer Goods 286.6 10.9 8.5 7.8 6.9 3.6 8.6
• Consumer durable segment is the only use-
-Durables 53.7 24.7 27.8 23.7 26.5 18.8 27.0
-Non durables 233.0 6.1 1.5 1.4 -1.2 -1.2 1.6
based category to grow at a robust and
consistent rate.
Drivers of growth
80.0
Capital Goods Consumer Durable Goods

60.0
• Capital good continues to surprise and is
the most volatile component among the use
40.0
based IIP category.
20.0

• Consumer non-durable goods, the worst

0.0
performer for last few months, showed a
-20.0 contraction of 1.2 per cent in August 2010.
Apr'07 Apr'08 Apr'09 Apr'10

Note: Graph depicts y-o-y gro wth with 3-mont h moving average
Source: Central Statistical Organisation, CRISIL computations

Outlook
The low growth recorded by IIP in August 2010 is as much a surprise as was high growth in July 2010 and the key reason
for this volatility is volatile growth in capital goods segment. As for the remaining months of this fiscal, high base is
expected to keep the industrial growth down to single digit, on an average the industrial growth in 2010-11 is expected
to be around 9.0 per cent.