The recent news headlines have been highlighting India’s robust core sector growth. In April, a significant growth of 8.4% was observed in India’s eight core sector industries in comparison to 4.9% in March 2022. These sectors play a significant role in the Indian economy as they make up for 40.27% of the weightage in the Index of Industrial Production (IIP). The sectors are ranked by their respective weightages: Refinery Products, Electricity, Steel, Coal, Crude Oil, Natural Gas, Cement, and Fertilizers.
Understanding the Index of Eight Core Industries
The Index of Eight Core Industries (ICI) is an evaluative tool which measures the volume of production on an industry level. It gives an insight into both the combined and individual performance of the eight selected core industries.
As of April 2021, the weightage of these eight industries was distributed as follows: Petroleum Refinery production with 28.04%, Electricity with 19.85%, Steel with 17.92%, Coal production with 10.33%, Crude Oil with 8.98%, Natural Gas production with 6.88%, Cement production with 5.37%, and Fertilizer production with 2.63%.
The compilation and release of the ICI data is undertaken by the Office of Economic Adviser (OEA), Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry.
The Significance of ICI
The ICI plays an important role in providing insights into the performance of ‘core’ industries before the data release of IIP from the National Statistical Office, NSO. It indicates the impact of these eight core industries on general economic and industrial activities.
Basics of the Index of Industrial Production
The Index of Industrial Production (IIP) is an indicator which measures the changes in the volume of industrial product production over a given period. This data is compiled and released on a monthly basis by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.
The IIP is essentially a reflection of the growth rate of industry groups classified under broad sectors such as Mining, Manufacturing, and Electricity and use-based sectors such as Basic Goods, Capital Goods, and Intermediate Goods. The base year for the IIP is 2011-2012.
The Importance of IIP
The IIP is widely used by governmental bodies including the Ministry of Finance and the Reserve Bank of India for policymaking purposes. Moreover, it is vital for calculating quarterly and advance Gross Domestic Product (GDP) estimates.
Previous Year Question (PYQ) from UPSC Civil Services Examination
In the 2015 ‘Index of Eight Core Industries’, Electricity had the highest weightage, making it the correct answer to the question: “In the ‘Index of Eight Core Industries’, which one of the following is given the highest weight?” The options were Coal production, Electricity generation, Fertilizer production, and Steel production.
To understand the importance of this data, we need to keep in mind that these eight core industries comprise 40.27% of the items included in the IIP. As of April 2021, the weightage of these sectors was: Petroleum Refinery production at 28.04%, Electricity at 19.85%, Steel at 17.92%, Coal production at 10.33%, Crude Oil at 8.98%, Natural Gas production at 6.88%, Cement production at 5.37%, and Fertilizer production at 2.63%.
Index of Industrial Production: An Overview
The Index of Industrial Production (IIP), in essence, provides detailed information about the growth of diverse sectors within an economy such as mineral mining, electricity, and manufacturing.
[Source: PIB]
