India’s industrial output displayed a significant rise of 11.5% in July, demonstrating an improved landscape compared to the 10.5% contraction experienced a year ago. This estimation is based on quick statistics provided by the National Statistical Office (NSO).
Growth Across Key Sectors
Three major sectors – Mining, Manufacturing, and Electricity – recorded growth rates of 19.5%, 10.5%, and 11.1% respectively. Even though these figures were influenced by a favourable base effect, they illustrated a steady recovery trend.
In addition to this, India’s eight core sectors, also known as the infrastructural output, grew by an impressive 9.4% in July 2021. These sectors include Refinery Products, Electricity, Steel, Coal, Crude Oil, Natural Gas, Cement, and Fertilizers, which contribute significantly to the country’s industrial production.
Recovery in Industrial Activities
The index bridged the gap substantially with the pre-pandemic level and kept only a nominal difference from the July 2019 mark. This indicates a gradual increase in industrial operations due to the easing of restrictions in key states as the second wave of Covid-19 diminished.
Role of Base Effect in Recovery
The upliftment is attributable to the Base Effect resulting from the Covid-19 lockdown that disrupted economic activities in 2020. Base effect refers to the influence that the selection of a basis of comparison or reference has on the outcome of the comparison between data points.
About Index of Industrial Production
The Index of Industrial Production (IIP) is an indicator that tracks changes in the volume of production of industrial goods over a specific period. The NSO under the Ministry of Statistics and Programme Implementation compiles and publishes this data monthly.
The IIP measures the growth rate of industry groups classified under broad sectors – Mining, Manufacturing, and Electricity – and use-based sectors including Basic Goods, Capital Goods, and Intermediate Goods. The base year for IIP is 2011-2012.
Significance of IIP
The IIP is essential for government bodies such as the Ministry of Finance, and the Reserve Bank of India for policy-making purposes. The IIP remains significant for calculating quarterly and advance GDP (Gross Domestic Product) estimates.
About Eight Core Sectors
The eight core sectors make up 40.27% of the weightage of items in the Index of Industrial Production. These sectors include Refinery Products, Electricity, Steel, Coal, Crude Oil, Natural Gas, Cement, and Fertilizers listed in decreasing order of their weightage in IIP.
