Context:
Index of Industrial Production (IIP) grew by 3% in March 2024, showing a slight recovery from February’s six-month low of 2.72%. However, FY25 IIP growth stood at 4%, marking the weakest growth in four years. By comparison, FY24 IIP growth was 5.9%.
The Index of Industrial Production (IIP)
The Index of Industrial Production (IIP) is a composite indicator in India that measures the short-term changes in the volume of production of a basket of industrial products. It’s a key economic indicator used to track the performance of various industrial sectors like mining, manufacturing, and electricity. The Central Statistical Organisation (CSO) compiles and publishes the IIP data monthly.
- What it measures:The IIP tracks changes in the physical output of industrial products, not just the value of those products.
- How it’s calculated:The IIP is a weighted average of the production of various industrial goods, with weights reflecting their importance in the overall industrial production.
- Why it’s important:The IIP provides insights into the health and growth of the industrial sector, helping policymakers, economists, and investors understand the overall economic performance.
Sector-wise Performance
- Consumer Non-Durables:
- Contracted by 1.6%.
- This segment continued to see declining output, contributing to the overall subdued industrial performance.
- Key Growth Sectors:
- Infrastructure Industries: 6.6% growth.
- Intermediate Goods: 4.1% growth.
- Capital Goods: 5.5% growth.
- Primary Goods: 3.9% growth.
- Consumer Durables: 7.9% growth, driven by electronics and computers.
- March 2024 Industrial Output:
- Electricity sector led the growth with 6.3%.
- Manufacturing sector grew by 3%.
- However, the mining sector saw a 0.4% decline.
Outlook
- Aditi Nayar, Chief Economist at Icra Ratings, raised concerns about the advancement of data release affecting the estimated growth rate for March, noting that further revisions are expected.
- Looking ahead, the US export frontloading will need monitoring to assess whether it’s driven by redirection from other regions or an actual bump in output.
