NEW DELHI: The new index of industrial production (IIP) series, with 2022-23 as the base year, is set to track the output of rare earths and minor minerals, piped natural gas (PNG), water supply, sewerage, and waste management for the first time. This was noted in the recommendations of the Technical Advisory Committee (TAC) constituted to undertake the base year revision under the chairmanship of IIM Kozhikode professor Mridul K Saggar. The new index will make its debut on June 1.
Base Year Revision Context
IIP will be the third major high-frequency economic indicator to undergo a base-year revision this year, following similar updates to Gross Domestic Product (base year 2022-23) and Consumer Price Index-based retail inflation (base year 2024).
Expansion of the IIP Basket
The IIP basket is set to expand to 1,042 items categorised under 463 groups in the new series, up from 839 items under 407 groups in the current series. The committee emphasized that regular revisions of base years for economic indicators like IIP are essential to ensure they remain representative of current industrial activity and accurately reflect evolving economic realities.
Items Dropped from the Basket
The committee also recommended dropping certain items from the basket, including kerosene, iodised salt, incandescent lamps, fluorescent tubes, compact fluorescent lamps, electric filament lamps, and sewing machines, among others.
Adoption of Producer Price Index as Deflator
The committee has recommended that the output Producer Price Index (PPI) be adopted as the preferred deflator for the new series once it becomes available, replacing the Wholesale Price Index (WPI). WPI may continue only as an interim measure.
Chain-Basing and Seasonal Adjustment
The committee also proposed chain-basing of the new IIP series, which will allow periodic updating of weights, typically on an annual basis, to better capture production patterns of the industry. Meanwhile, seasonal adjustment of IIP may be undertaken only after availability of a desirable length of time series data, specifically five years of monthly data.
