India proposes broad revamp of industrial output index ahead of new series

New Delhi: India's statistics ministry has proposed changes to the ​way it calculates the monthly ​industrial output, including expanding sector coverage and adopting a ​chain-linked framework, ahead of the new series of the data due next week.

A technical advisory panel of the ministry recommended broad changes to the Index of Industrial Production (IIP), ‌including tracking ⁠renewable power ⁠generation separately and adding utilities such as gas supply, water supply, sewerage and waste ​management.

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Key changes and recommendations to the index include:

Revising the IIP base year ​to 2022-23 from 2011-12 to better reflect the current industrial structure.

Introducing a chain-based approach along with the fixed-base index, allowing weights to be ​updated annually to better capture structural shifts ⁠in industry and ‌reduce bias from outdated weights.

Using the geometric ​mean method ​to link the 2011-12 series and 2022-23 series. The ⁠linking factors will be calculated at aggregated levels for ​the general and sectoral indexes.

Expanding the IIP basket ​to 463 item groups from 407, including new sectors such as gas supply, water supply, sewerage and waste management.

The manufacturing basket will see 120 new item groups added and 64 dropped.

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Splitting electricity generation into renewable and non-renewable categories to better capture India's energy transition.

‌Including minor minerals and rare earth minerals in mining output to reflect their growing role in infrastructure, clean energy ​and high-tech manufacturing.

​Retaining "not elsewhere classified" (n.e.c.) ⁠items in the manufacturing basket to improve representation of emerging products and industries.

A formal framework for the substitution and augmentation of factories to replace ​closed or outdated units to reflect changing production patterns.

Shifting from the Wholesale Price Index to the Producer Price Index as the preferred deflator for IIP calculations once available.

Creating separate industrial indexes for the unincorporated sector and eventually publishing seasonally adjusted IIP data.