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 Index of Industrial Production (IIP)


The Index of Industrial Production (IIP)  is a short term indicator of how the industrial sector in the country is progressing. The data is released every month (along with inflation data) by Ministry of Statistics and Programme implementation (MOSPI). As the name suggests, the IIP measures the production in the Indian industrial sectors keeping a fixed reference point. As of today, India uses the reference point of 2004-05. The reference point is also called the base year.
Roughly about 15 different industries submit their production data to the ministry, which collates the data and releases it as an index number. If the IIP is increasing it indicates a vibrant industrial environment (as the production is going up) and hence a positive sign for the economy and markets. A decreasing IIP indicates a sluggish production environment, hence a negative sign for the economy and markets.
To sum up, an upswing in the industrial production is good for the economy and a downswing rings an alarm. As India is getting more industrialized, the relative importance of the Index of Industrial Production is increasing.
A lower IIP number puts pressure on the RBI to lower the interest rates. The following graph shows the change in IIP in percentage terms for the last 1 year.

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