Index for Industrial Production

 

For: Mains

Topics covered:

• Key findings of the latest release data
• About the Index of Industrial Production

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News Flash

Industrial activity in September contracted sharply by 4.3%, driven by major contractions in the capital goods (20.7%), mining (8.5%), and manufacturing sectors (3.8%), lowest in 8 years.

This is the first time after November 2012 that all three broad-based sectors have contracted and the lowest monthly growth in the 2011-12 base year series.

 

Highlights

• The consumer durables sector continued to shrink in September, by 9.9%.
• The consumer non-durables sector contracted by 0.4%
• India’s core sector output contracted 5.2% in September, posting its worst performance in 14 years.
• Mining output shrank 8.5% in September while electricity generation contracted 2.6% in the month.
• Production of primary goods shrank 5.1% while that of intermediate goods rose 7%.
• Production of capital goods shrank 20.7% in September
• Growth for the current fiscal year may dip to around 4.7%

 

 

Impact

• The Indian economy is presently facing a structural growth slowdown originating from declining household savings rate, and low agricultural growth.
• Low agricultural growth is feeding into low agricultural and non-agricultural wage growth in rural areas, which is impacting rural demand adversely

 

 

Index for Industrial Production

The Index of Industrial Production (IIP) is an index that shows the growth rates in different industry groups of the economy in a stipulated period of time. IIP is a composite indicator that measures the growth rate of industry groups classified under,

1. Broad sectors, namely, Mining, Manufacturing and Electricity

2. Use-based sectors, namely Basic Goods, Capital Goods and Intermediate Goods.

• Currently, IIP figures are calculated considering 2004-05 as the base year.
• The IIP index is computed and published by the Central Statistical Organisation (CSO) on a monthly basis.

 

 

Important Information

The RBI has cut interest rates by a cumulative 135 basis points this year and will review monetary policy early next month (December 5)

Moody’s Investor Service lowered its outlook on India’s sovereign rating (Baa2) to negative from stable, saying that the domestic economic downturn could be structural, as opposed to cyclical, implying that more policy changes were needed in order to revive growth.

 

Source: The Hindu

 

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