As the government is expected to introduce a new index of industrial production (IIP) in around 4 months, the benchmark for measuring industrial production in India is all set to change.
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However, the new index will use 2004-05 as the base year of calculation instead of 1993-94.
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The number of commodities will go up to around 850, from 543 whereas nearly 30% of the existing commodities will be swapped by new ones.
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It’ll certainly be a much more recent picture, no question about it.
As in recent times, the product composition has changed dramatically, so both the widening and the deepening of the economy will be reflected.
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Moreover, the weight assigned to different product groups as part of the final index will also change since they are presently incompatible with the changes in production patterns.
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Such as, mobile phones are not included in the index while LCDs are not included in television sales.
Moreover, the weightage given to autos is well below their importance in the economy.
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However, it is said that the weightages will change in order to fix these like the weight for basic goods will rise by 5% points while that for capital goods will rise by 5.7% points.
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Morever, the intermediate goods will see the biggest hit, losing 7.7% points and consumer durables will increase in weight while consumer non durables will be lighter by 5% points.
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Change in weights of different commodity groups:
Similarly, electricity will rise by close to 2% points but manufacturing will take a hit of over 7.5% points.
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The new IIP index will definitely give us a better idea of the kind of changes industrial production has undergone in the past decade.
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However, collection of the base data in time would pose as a major challenge for the government as different departments are responsible for collecting the data.
In recent times, collecting data from the manufacturing sector, is already turning out to be a problem as companies aren’t responding fast enough.
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