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Economic Bytes: Factory output positive in November

Factory output positive in November

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In News:

  • The data of Index of Industrial Production (IIP) has been released by the National Statistical Office (NSO).
  • As per the data, the country‚Äôs industrial production growth turned positive in November after three consecutive months of contraction.

News Summary: IIP data for November 2019

Overall data:

  • Official data showed the index of industrial production (IIP) grew 1.8% in November.
  • This was higher than the revised contraction of 4% in October 2019 and above the 0.2% posted in November 2018.
  • However, economists noted that the segment-wise numbers still showed that the sector remained sluggish and will need measures to support expansion.
  • Between April and November, industrial output growth rose a paltry 0.6% compared to 5% in the year-earlier period.

Various components:

  • The three components of the IIP are mining, manufacturing and electricity.
  • Manufacturing sector grew an annual 2.7% in November compared with the 0.7% contraction in November 2018.
  • Mining rose 1.7% compared to a 2.7% expansion in year-ago period.
  • The electricity sector contracted for the fourth consecutive month, declining 5% during the month compared to a growth of 5.1% in the year-earlier period.

Growth in different sectors under IIP:

  • The consumer goods sector contracted for the 11th consecutive month by 8.6% in November compared with a decline of 4.1% in the year-ago month.
  • Consumer durables declined for the sixth successive month in November by 1.5% compared to a contraction of 3% in the year-earlier period, highlighting the demand slowdown in consumption.

Way ahead:

  • The industrial sector has been sluggish for a sustained period as demand conditions have remained tepid and a sharp slowdown has gripped the economy.
  • The government has forecast the economy to grow 5% in 2019-20, the slowest pace in 11 years.
  • The government and the RBI have been taking steps to revive growth and experts expect a revival in the coming months.
  • There is expectation in the industry that the Union Budget to be unveiled on February 1 will have further measures to boost the economy

About: Index of Industrial Production (IIP)

  • The Index of Industrial Production data or IIP is an index that tracks manufacturing activity in different sectors of an economy.
  • The IIP number measures the industrial production for the period under review, usually a month, as against the reference period.
  • IIP is a key economic indicator of the manufacturing sector of the economy.
  • There is a lag of six weeks in the publication of the IIP index data after the reference month ends.
  • IIP index is currently calculated using 2011-2012 as the base year.

Components of IIP:

  • Mining, manufacturing, and electricity are the three broad sectors in which IIP constituents fall.
  • Electricity, crude oil, coal, cement, steel, refinery products, natural gas, and fertilizers are the eight core industries that comprise about 40% of the weight of items included in the Index of Industrial Production.

Who releases Index of Industrial Production or IIP data?

  • Earlier, the IIP data was compiled and published by Central Statistical Organization (CSO) every month. However, after CSO merger with NSSO, NSO releases the data.
NOTE: In May 2019, the Ministry of Statistics and Programme Implementation (MoSPI) merged the Central Statistics Office (CSO) and the National Sample Survey Office (NSSO) into National Statistical Office (NSO).


Importance of Index of Industrial Production:

  • The IIP is used by public agencies including the Government agencies/ departments including that in the Ministry of Finance, the Reserve Bank of India etc. for policy purposes.
  • The all-India IIP data is used for estimation of Gross Value Added (GVA) of Manufacturing sector on quarterly basis.
  • Similarly, the data is also used extensively by analysts, financial intermediaries and private companies for various purposes.
Factory output positive in November
Factory output positive in November

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