The Index of Industrial Production (IIP) serves as a vital indicator measuring short-term changes in the volume of industrial goods produced in India. It reflects the health of the country’s industrial sector and provides a critical input for economic policy formulation. Recently, the Ministry of Statistics and Programme Implementation (MoSPI) proposed revising the IIP methodology — including the substitution of closed factories and updating the base year to 2022–23 — to make the index more accurate, relevant, and reflective of the current industrial landscape.
Outdated Factory Sample: Many factories currently included in the IIP basket are either closed or inactive, leading to unreliable production estimates.
Dependence on Estimations: The closure of listed factories has forced reliance on imputed data, reducing accuracy and credibility.
Economic Structural Changes: Since the last revision in 2017, India’s industrial landscape has evolved with emerging industries and new technologies requiring updated representation.
Base Year Update: The existing base year of 2011–12 is outdated and fails to capture recent technological advancements, making 2022–23 a more appropriate benchmark.
Improved Policy Accuracy: Policymakers depend on IIP data to track industrial momentum; accurate data ensures informed decision-making and targeted policy interventions.
Selection of Comparable Units: New factories may be added to replace defunct ones if they produce the same item or belong to the same industrial group.
Comparable Output Value: The gross value added (GVA) or gross value of output (GVO) of the new factory must be similar to the unit being replaced to maintain consistency.
Operational Record: The selected factory must be operational for at least 12 months before inclusion.
Data Requirement: Twelve months of prior production data are required for statistical consistency.
Temporary Gaps: In cases where overlapping data are unavailable, temporary “nil” or imputed values may be used, which can briefly impact monthly output figures.
The revision is part of a comprehensive overhaul of the IIP framework, last updated in 2017. The upcoming revision will adopt 2022–23 as the new base year, with revised indices expected by May 2026.
The IIP currently draws production data from 14 source agencies, covering 407 items across three sectors: Mining, Manufacturing, and Electricity. These are further categorized into six groups — Primary goods, Capital goods, Infrastructure/construction goods, Intermediate goods, Consumer durables, and Consumer non-durables. The revision aims to align these categories with contemporary industrial capacities and product diversity.
India’s industrial growth rate stood at 4% in September 2025. During the first half of FY 2025–26, industrial output grew by 3%, compared to 4.1% during the same period in FY 2024–25. The proposed revision is expected to reduce estimation errors and improve data precision in future assessments.
Enhanced Accuracy: Substituting defunct factories ensures that IIP data accurately reflects active industrial output.
Policy Relevance: Reliable IIP data supports better policy planning by the government, RBI, and economic analysts.
Reduced Dependence on Estimation: Replacing inactive units with real data sources improves reliability.
Updated Industrial Representation: Captures growth in sectors such as digital manufacturing, green technology, and renewable energy.
Greater Transparency: The feedback-driven revision process ensures a robust, data-backed, and widely supported methodology.
Data Collection Delays: Achieving uniform reporting across diverse industrial units can be logistically challenging.
Transitional Data Gaps: Temporary imputed data may distort short-term industrial growth trends.
Coordination with Source Agencies: Synchronizing data from 14 source agencies requires strong institutional alignment.
Industrial Volatility: Frequent entry and exit of manufacturing units may affect sample stability and consistency.
Strengthen Data Infrastructure: Use digital systems for real-time data collection and validation.
Regular Methodological Reviews: Conduct periodic updates to minimize long data gaps between revisions.
Stakeholder Consultation: Engage with industry associations, economists, and statisticians for transparent decision-making.
Integration with Other Indices: Align IIP revisions with GDP and CPI updates for coherent macroeconomic analysis.
Capacity Building: Enhance the technical skills of statistical personnel and data collection agencies.
The proposed IIP methodology revision marks a major step toward improving accuracy, credibility, and contemporaneity in industrial statistics. By substituting outdated factory samples and updating the base year to 2022–23, MoSPI aims to make the IIP a more reliable measure of India’s industrial health. Effective implementation, strong coordination, and high-quality data will be crucial to ensuring that this reform strengthens the foundation of India’s economic analysis.
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