Categories: Economy

Index of Industrial Production (IIP) Witnessed Contraction of 0.8% in August 2022

India’s industrial production slipped to an 18-month low, contracting by 0.8 per cent in August, mainly due to a decline in output of the manufacturing and mining sectors, according to official data. The data showed that the previous low in industrial output growth was a contraction of 3.2 per cent in February 2021.

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What Is IIP:

Index of Industrial Production (IIP) is an index which details out the growth of various sectors in the economy. The Eight Core Industries comprise more than 40 percent of the weight of items included in IIP. These are Electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilisers.

Key Points:

  • It is compiled and published monthly by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.
  • It is a composite indicator that measures the growth rate of industry groups classified under:
    • Broad sectors, namely, Mining, Manufacturing, and Electricity.
    • Use-based sectors, namely Basic Goods, Capital Goods, and Intermediate Goods.
  • Base Year for IIP is 2011-2012.
  • Significance of IIP:
    • It is used by government agencies including the Ministry of Finance, the Reserve Bank of India, etc, for policy-making purposes.
    • IIP remains extremely relevant for the calculation of the quarterly and advance GDP (Gross Domestic Product) estimates.
  • About Eight Core Sectors:
    • These comprise 40.27% of the weight of items included in the Index of Industrial Production (IIP).
    • The eight core sector industries in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.

Declining Manufacturing Output:

The previous low in industrial output growth was a contraction of 3.2 per cent in February 2021. Factory output, measured in terms of the IIP, had expanded by 13 per cent in August 2021. The IIP grew by 2.2 per cent in July this year. The data released by the Statistics and Programme Implementation Ministry showed that for the month of August 2022, the Quick Estimates of IIP with base 2011-12 stood at 131.3. During April-August this year, IIP rose 7.7 per cent against 29 per cent growth in the same period a year ago.

As per the data, the manufacturing sector shrank by 0.7 per cent in August 2022 compared to the 11.1 per cent growth recorded in the year-ago period. The power sector showed a growth of 1.4 per cent against a 16 per cent rise a year ago. The mining sector witnessed a contraction of 3.9 per cent in August 2022, whereas there was a growth of 23.3 per cent in the year-ago period. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of August 2022 stand at 99.6, 131.0 and 191.3 respectively.

About The Investment: A Big Concern:

Capital goods output, which is a barometer of investments, rose five per cent in August 2022 compared to 20 per cent growth in the year-ago month. The consumer durables segment declined 2.5 per cent from 11.1 per cent growth a year ago. The primary goods segment, which accounts for nearly 34 per cent of the index, expanded 1.7 per cent in August compared to 16.9 per cent growth in the year-ago period. The ministry said the growth rates over the corresponding period of the previous year are to be interpreted, considering the unusual circumstances on account of the COVID-19 pandemic since March 2020.

Growth In India’s Services Sector Is Also Not Shinning, Please Read This Article:

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Piyush Shukla

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