Index of Industrial Production and its comparison from BRICS nations

1. PRESTIGE INSTITUTE OF MANAGEMENT &
RESEARCH
Topic
“Index of Industrial Production and its Comparison”
Submitted to:-
Dr. Rupal Choudhary
Submitted by:-
AYUSH YADAV
MBA (FA)
1121806727

2. What is Index of Industrial Production ???
 Index which details out the growth of industrial sectors in
the economy.
 One of the prime indicators of the economic
development and the short-term economic analysis.
 Measures trend in the behaviour of industrial production
over a period of time with reference to a chosen base
year.

3. Functions of IIP
 To prepare monthly as well as annual industrial
production.
 To comprise main characteristics of Annual Survey of
Industries (ASI) returns on district and group level.

4. Usage and Importance
 Used by the planners, the state and the central
government and at different levels for different policy
decisions and other purposes.
 Used by the state government for preparation of state
income estimates of manufacturing sector.
 Used by many countries in the annual and quarterly
national accounts in many countries.

5.  The monthly IIP helps many countries to use it as a
reference series in the compilation of cyclical indicators
which helps to predict the future turning points in
business cycle.
 Investors can use the IIP of various industries to examine
the growth in the respective industry.

6. Calculation of IIP
 It is calculated using LASPEYERS formula-
 IIP = Σ ( W1 * R1 )/Σ W1
 Where,
 R1 = P1 X 100/P0
 W1 = Base year weights
 P1 = Production in current year
 P0 = Production in base year

7. IIP Index Structure

8. Problem with IIP
 LASPEYERS formula have following drawbacks-
 Subsequent change in weights is not accounted.
 Change in quality of goods is not considered.
 Addition of new goods is not accounted till the next
revision.
 Substitution effort is not considered.
 Data Collection Problem-
 Data from unorganized sectors is difficult to obtain.
 No Standardized data collection & production.

9. Impact of IIP in Indian Economy

10. IIP of India 2013-2014
Actual Previous Highest Lowest Dates Unit Frequency
0.5 3.4 20 -7.2 1994 -
2014
Percent Monthly

11. Index of Industrial Production of BRICS
nation
Countries IIP Reference Previous Highest Lowest
Brazil -3.6 Jul-14 -7.1 20.12 -17.47
Russia 0 Aug-14 1.5 10.9 -16.9
India 0.5 Jul-14 3.4 20 -7.2
China 6.9 Aug-14 9 29.4 -21.1
South Africa -7.9 Jul-14 0.2 10.4 -23.2

12. Conclusion
 Low IIP values have direct effect on stock prices.
 Lower employment.
 Fundamentally strong stocks becomes undervalued.
 FIIs starts pulling out money from Indian stock market.
 Rupee depreciates with respect to USD.

13.  Have a positive impact on the banking sector.
 Lower supply coupled with lower demand can have
catastrophic impact on stock market and was one the
main reasons for drop in Sensex from 20,000 to 8,000 in
2008.

14. Q & A

15. Thank You