Industrial Growth Falls to 17-Month Low

Prelims level : Economy Mains level : Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
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In News:

  • Industrial output growth dropped to a 17-month low of 0.5 percent in November on account of contraction in manufacturing sector, particularly consumer and capital goods.


  • Factory output as measured in terms of the Index of Industrial Production (IIP) had grown by 8.5% in November 2017, as per data released by the Central Statistics Office (CSO)
  • The previous low was in June 2017, when IIP growth contracted by 0.3 per cent. The growth for October 2018 was revised upwards to 8.4 per cent from 8.1 per cent.
  • During the April-November period, industrial output grew 5 per cent as compared to 3.2 per cent in the same period of the previous fiscal.
  • The manufacturing sector, which constitutes 77.63 per cent of the index, recorded a contraction of 0.4 per cent in November as against a growth of 10.4 per cent a year ago.

Index of industrial production:

  • Index of Industrial Production (IIP) measures the quantum of changes in the industrial production in an economy and captures the general level of industrial activity in the country.
  • It is a composite indicator expressed in terms of an index number which measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to the base period.
  • The base year is always given a value of 100. The current base year for the IIP series in India is 2011-12. So, if the current IIP reads as 116 it means that there has been 16% growth compared to the base year. IIP is a short-term indicator of industrial growth till the results from Annual Survey of Industries and National Accounts Statistics are available. However, IIP is considered to be one of the lead indicators for short-term economic analysis because of its strong relationship with economic fluctuations in the rest of economy. Most of services, like transport, storage, communication, real estate, insurance and banking are industry dependent and are considerably influenced by industrial performance. Index of Industrial Production is compiled and published every month by Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation with a time lag of six weeks from the reference month. i.e., at the time of release of IIP data, quick estimates for the relevant month along with revised and final indices of previous two months respectively, (on the basis of updated production data) are released.

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