In the recent economic news, data shows that the output growth of India’s eight main core sectors has slightly diminished to 12.7% in June 2022, down from 18.1% in May 2022. However, all sectors, excluding crude oil, have experienced an increase in production.
Definition of Core Sectors
The core sectors are considered the backbone of any economy, and for India, these include Coal, Crude Oil, Natural Gas, Refinery Products, Fertiliser, Steel, Cement, and Electricity. Their importance is evident in their contribution to the Index of Industrial Production (IIP), accounting for 40.27%.
For better understanding, these core sectors can be arranged following their respective weightage in descending order: Refinery Products, Electricity, Steel, Coal, Crude Oil, Natural Gas, Cement, and Fertilisers.
Understanding the Index of Industrial Production (IIP)
The IIP serves as an imperative indicator, gauging the changes in the volume of industrial product production for a specific period. It is formulated and issued monthly by the Central Statistical Organization (CSO), a branch of the Ministry of Statistics and Programme Implementation.
The IIP’s comprehensive nature allows it to evaluate the growth rate of various industry groups divided into broad sectors of Mining, Manufacturing, and Electricity, and use-based sectors consisting of Basic Goods, Capital Goods, and Intermediate Goods. The base year for the IIP is 2011-2012.
The Significance of IIP
The IIP is crucial to several government entities, including the Ministry of Finance and the Reserve Bank of India. These agencies utilize it for devising policies due to its relevance in the computation of quarterly and advance GDP estimates.
The Importance of the Eight Core Industries in the UPSC Civil Services Examination
The significance of the Eight Core Industries is often highlighted in the UPSC Civil Services Examination. For instance, a previous question asked which industry had the highest weightage in the Index of Eight Core Industries as of 2015. The correct answer was Electricity, which accounted for the highest percentage of weightage.
As of April 2021, the following are the current weights of the eight core industries: Petroleum Refinery production (28.04%), Electricity (19.85%), Steel (17.92%), Coal production (10.33%), Crude Oil (8.98%), Natural Gas production (6.88%), Cement production (5.37%), and Fertilizer production (2.63%).
Insight into the Index of Industrial Production
The Index of Industrial Production (IIP) provides detailed insights into the growth of various sectors in an economy such as mineral mining, electricity, manufacturing, etc. It is compiled and published monthly by the Central Statistical Organisation (CSO), Ministry of Statistics and Programme Implementation six weeks after the reference month ends. The Base Year of the Index of Eight Core Industries was revised in April 2017, changing from the year 2004-05 to 2011-12.