Brief Information on Index of Industrial Production (IIP) Trends of IIP & Inflation in 2020 Effects of Covid & GDP Performance

1. INDEX OF INDUSTRIAL
PRODUCTION (IIP)

2. Index of Industrial Production
 Index of Industrial Production (IIP) shows the performance of different industrial
sectors of the Indian economy.
 Estimated and published on a monthly basis by the Central Statistical
Organization (CSO)
 “It is a composite indicator that measures the short-term changes in the volume of
production of a basket of industrial products during a given period with respect to
that in a chosen base period.”
2

3. Importance of IIP
 IIP is the only measure on the physical volume of production
 Used by public/Government agencies including Ministry of Finance,
Reserve Bank of India etc.
 All-India IIP data is used for estimation of Gross Value Added of
manufacturing sector
 Data is also used extensively by analysts, financial intermediaries and
private companies
3

4. 4
IIP Index Structure

5. Classification of IIP
5
Mining
Manufacturing
Electricity
WEIGHTAGE
77.633%
14.373%7.994%
Majorly divided into three sectors :
 Mining
 Manufacturing
 Electricity

6. Highlights of Changes Introduced :
2011-12 Compared to 2004-05 Base Year
6
 Clubbing of new groups as compared to previous ones
 Some items added, some have been deleted
 The number of source agencies reporting data got changed
 27 nonmetallic minerals designated as minor minerals
 Including data on electricity generation from renewable sources

7. PRE-COVID TRENDS
7
Source: CNBC
 Jan 2020 IIP came at 2% (MoM) which turns out to
positive comparing it with Dec; -0.3%
 Feb. 2020 CPI stood at 6.58 made a sharp fall of full
1% point below as compared to Jan 2020
 Therefore, in the starting of year 2020, growth up and
inflation down was the “Double Delight” Indian
economy had
0.00%
5.00%
10.00%
Oct
2019
Nov Dec Jan
2020
Feb
4.62% 5.54%
7.35% 7.60% 6.58%
CPI (in %age)
-5.0%
0.0%
5.0%
-4.3% -3.8%
1.8%
-0.3%
2.0%
IIP (in %age)
Sep Oct Nov Dec Jan
2019 2020

8. TRENDS IN IIP 2020
8
Source: CNBC
 IIP expands to 3.6% in the month of October
 It was big recover over the past few months
 Festive seasons would have pushed to build
more inventories
 Consumer non-durable grown by 7.5% and
durable goods by17.6% having the
advantage of base effect
 Other categories also showed a good growth
majorly benefiting from the base effect
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
-16.50%
-10.70%
-7.30%
0.20%
3.60%
Industrial Output (In %)
June July August Sept. Oct

9. SECTOR-WISE GROWTH: OCT 2020
9
Source: CNBC
MANUFACTURING: showed a growth of
3.5%
ELECTRICITY: There was huge growth of
11.2% in the electricity but was not given
much weightage as oct 2019 was a
washout month because of rains and
stood -12%
MINING: the only sector which showed
the negative growth in the month of Oct.
3.5%
11.2%
-1.5%
-0.6%
4.9%
1.4%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Sectorwise Growth (In %)
Oct Sep
Manufacturing Electricity Mining

10. GDP AND IIP
10
India Industrial Output Shrinks for 5th Month
Industrial production in India shrank 10.4 percent year-on-year in July of 2020,
following a downwardly revised 15.8 percent fall in June and compared to forecasts
of an 11.5 percent drop.
India Industrial Output Falls More than Forecast
India's industrial production slumped 8.0 percent from a year earlier in August 2020,
following a revised 10.8 percent tumble in the previous month and compared to
market expectations of a 7.5 percent contraction.
India Industrial Output Growth Strongest since February
Industrial production in India jumped 3.6 percent year-on-year in October of 2020,
following an upwardly revised 0.5 percent rise in September and beating market
forecasts of 1.1 percent.

11. EFFECT OF COVID
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 The industrial production had witnessed a 5.2 per cent growth in February
this year. Thereafter it recorded a contraction of 18.7 per cent in March, (-)
57.3 per cent in April, (-) 33.4 in May, (-) 16.6 in June and (-) 10.8 in July this
year.
 Manufacturing contracted 20.6% in March while electricity generation
shrank 6.8%, compared with 11.5% growth in February. Mining output was
flat in March after it grew 9.7% in February.
 PMI for services was 5.4, 12.6 and 33.7 in April, May and June, respectively.
These numbers were 27.4, 30.8 and 47.2 for manufacturing.
 Capital goods(barometer of investment) and consumer durables saw the
steepest fall in output at 35.6% and 33.1%, respectively

12. CHALLENGES FACED
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 IIP turns out to be a not-so-good indicator of actual industrial growth
 The six-week lag in releasing India's IIP numbers is relatively long
 IIP series suffers from old problems of unreliability and high volatility
 Data collected in manufacturing industry is only for organized sector
which constitute of 25% only
 Source of data is always doubtful

13. THANK YOU
Kartikeya Chauhan( 20DM101)
Kishan Kumar (20DM104)
Mohan Nihal (20DM123)
Mohit Singhla (20DM125)
Neha Virmani (20DM134)
GROUP 11