Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

[pib] Index of Industrial Production (IIP) grows by 5.7% in February, 2024


From UPSC perspective, the following things are important :

Prelims level: Index of Industrial Production (IIP), Core Industries etc.

Mains level: NA

Why in the news?

India’s Index of Industrial Production (IIP) increased by 5.7% in February, up from 3.8% in January, according to data from the Ministry of Statistics and Programme Implementation (MoSPI).

What is Index of Industrial Production (IIP)?

  • IIP as it is commonly called is an index that tracks overall manufacturing activity in different sectors of an economy.
  • It is currently calculated using 2011-2012 as the base year.
  • It is compiled and published by Central Statistical Organisation (CSO) every month.
  • CSO operates under the Ministry of Statistics and Programme Implementation (MoSPI).

Components of IIP:

  • Three broad sectors in IIP:
  1. Manufacturing (77.6%),
  2. Mining (14.4%)
  3. Electricity (8%).
  • Electricity, crude oil, coal, cement, steel, refinery products, natural gas, and fertilizers are the eight core industries that comprise about 40 per cent of the weight of items included in the IIP.

Basket of products:

There are 6 sub-categories:

  1. Primary Goods (consisting of mining, electricity, fuels and fertilisers)
  2. Capital Goods (e.g. machinery items)
  3. Intermediate Goods (e.g. yarns, chemicals, semi-finished steel items, etc)
  4. Infrastructure Goods (e.g. paints, cement, cables, bricks and tiles, rail materials, etc)
  5. Consumer Durables (e.g. garments, telephones, passenger vehicles, etc)
  6. Consumer Non-durables (e.g. food items, medicines, toiletries, etc)

Who uses IIP data?

  • The factory production data (IIP) is used by various government agencies such as the Ministry of Finance, the Reserve Bank of India (RBI), private firms and analysts, among others for analytical purposes.
  • The data is also used to compile the Gross Value Added (GVA) of the manufacturing sector in the Gross Domestic Product (GDP) on a quarterly basis.

IIP base year change:

  • The base year was changed to 2011-12 from 2004-05 in the year 2017.
  • The earlier base years were 1937, 1946, 1951, 1956, 1960, 1970, 1980-81, 1993-94 and 2004-05.

What are the Core Industries in India?

  • The main or the key industries constitute the core sectors of an economy.
  • In India, there are eight sectors that are considered the core sectors.
  • They are electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilizers.

About Index of Eight Core Industries (ICI)  

  • The monthly Index of Eight Core Industries (ICI) is a production volume index.
  • ICI measures collective and individual performance of production in selected eight core industries: Coal (10%), Crude Oil (8.98%), Natural Gas (6.88%), Refinery Products (28.04%), Fertilizers (2.63%), Steel (17.92%), Cement (5.37%), and Electricity (20.18%).
  • Prior to the 2004-05 series six core industries namely Coal, Cement, Finished Steel, Electricity, Crude petroleum and Refinery products constituted the index basket.
  • Two more industries i.e. Fertilizer and Natural Gas were added to the index basket in 2004-05 series. The ICI series with base 2011-12 will continue to have eight core industries.

Components covered in these eight industries for compilation of index are as follows:

  1. Coal – Coal Production excluding Coking coal.
  2. Crude Oil – Total Crude Oil Production.
  3. Natural Gas – Total Natural Gas Production.
  4. Refinery Products – Total Refinery Production (in terms of Crude Throughput).
  5. Fertilizer – Urea, Ammonium Sulphate (A/S), Calcium Ammonium Nitrate (CAN), Ammonium chloride (A/C), Diammonium Phosphate (DAP), Complex Grade Fertilizer and Single superphosphate (SSP).
  6. Steel – Production of Alloy and Non-Alloy Steel only.
  7. Cement – Production of Large Plants and Mini Plants.
  8. Electricity – Actual Electricity Generation of Thermal, Nuclear, Hydro, imports from Bhutan.

How is IIP different from ICI?

  • IIP is compiled and published monthly by the National Statistics Office (NSO), Ministry of Statistics and Programme Implementation six weeks after the reference month ends.
  • However, ICI is compiled and released by Office of the Economic Adviser (OEA), Department of Industrial Policy & Promotion (DIPP), and Ministry of Commerce & Industry.
  • The Eight Core Industries comprise nearly 40.27% of the weight of items included in the Index of Industrial Production (IIP). These are Electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilisers.


[2015] In the Index of Eight Core Industries, which one of the following is given the highest weight?

(a) Coal Production

(b) Electricity generation

(c) Fertilizer Production

(d) Steel Production

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