Revised Industrial Output Index Shows Pickup In Activity In March

Industrial output rose 2.7 percent in March compared to 1.9 percent in February, according to the revised Index of Industrial Production (IIP) released by the government on Friday.

The new index changes the base year to 2011-12 and adjusts the basket of goods to reflect changes in the economy. It also tries to reduce swings in the notoriously volatile capital goods sub-index by capturing data at different stages of the project rather than in one single shot at the time of completion of production.

Based on the revised index, industrial output remained positive and showed an uptick between February and March. However, the 2.7 percent growth in industrial output in March this year was lower than the 5.5 percent seen in March 2016. The Central Statistical Office (CSO) has provided back-data based on the new index from 2012-13.

Among the key components of industrial output, growth in the mining and electricity sectors strengthened while manufacturing held steady.

• The mining sector grew 9.7 percent in March compared to 4.6 percent in February
• The manufacturing sector grew 1.2 percent in March compared to 1.4 percent in February
• The electricity sector grew 6.2 percent in March compared to 1.2 percent in February

In the case of mining and electricity, reported growth was stronger than what it would have been under the old series, under which mining would have grown at 7.9 percent and electricity would have grown at 5.8 percent. Growth in manufacturing under the old and new series was similar.

Also Read: Consumer And Wholesale Inflation Fall Sharply In April

New IIP: How Different?

Apart from the change in the base year, the new index adjusts the basket of goods to make it more representative of the economy today. The new index will have 809 items, with 149 new items added and 124 old items deleted.

One such change, for instance, is the inclusion of renewable energy in the electricity sub-index. This particular inclusion is being done from April 2014 onwards.

In the compilation of the capital goods index, a significant change has been made in the stage at which data is collected to make that data less volatile. Under the new series, capital goods data will be captured in terms of ‘work in progress‘ to avoid reporting of production figures in bulk after the completion of production, said the CSO in its release.

The government’s statistical arm has also made some changes to how it classifies goods based on use. The category of ‘basic goods’ has been replaced with a category called ‘primary goods’. A new category called ‘infrastructure and construction goods’ has been included to understand condition in the economically critical infrastructure and construction sectors.