Understanding the Index of Industrial Production (IIP)
The Index of Industrial Production (IIP) is one of the most crucial indicators of India’s economic health. Further, it measures the level of industrial activity in the country and serves as a barometer of economic momentum. Each movement in the IIP reflects underlying changes in demand, supply chains, investment patterns, and the overall vitality of key industries. In addition, policymakers rely on it to frame economic policies, businesses use it to plan strategies, and economists study it to analyze growth trends. In short, the IIP captures the pulse of industrial development, making it indispensable for anyone tracking India’s economy.
Relevance for UPSC/APSC and Other State PSC Exams
Especially for aspirants of UPSC, APSC, and other state public service commissions, understanding IIP is highly significant. Furthermore, it forms an integral part of the Economy section in the syllabus, often linked to topics such as economic growth, planning, industrial policy, and government interventions. Questions on IIP may particularly appear in Prelims as factual or analytical MCQs and in Mains within Economy and GS-3 papers, requiring conceptual clarity and the ability to link IIP trends with broader issues like employment, inflation, and investment. A clear grasp of IIP also enriches answers in the essay and interview stages, where candidates are expected to connect economic indicators with real-world implications.
Index of Industrial Production (IIP) Latest News
In February 2025, India’s industrial output grew by only 2.9%, marking the slowest pace in the last six months. In addition, this growth rate was well below the market expectation of 4%.Correspondingly, the July 2025 data has brought some relief by showing an improved growth rate of 3.5%, up from the quick estimate of 1.5% in June 2025. Hence, sectoral performance was mixed:
- Mining declined by 7.2%.
- Also , Manufacturing expanded by 5.4%.
- Moreover, Electricity inched up by just 0.6%.
The General Index stood at 155.0 in July 2025, compared to 149.8 a year earlier. Accordingly, within manufacturing, sectors like basic metals (+12.7%), electrical equipment (+15.9%), and non-metallic minerals (+9.5%) drove growth, showing how specific industries can offset weaknesses in others.
What is the Index of Industrial Production (IIP)?
Further, the Index of Industrial Production is a statistical tool that measures short-term changes in the volume of production across India’s industrial sector. Another key point is that it is published by the Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation (MoSPI), and the index is released every month.
The base year currently used is 2011–12, which better reflects modern production structures compared to earlier base years such as 1937, 1946, and 1956.
Hence , by capturing movements in production, the IIP acts as a barometer of industrial health and offers policymakers an early signal of economic trends.
What is the Composition of the Index of Industrial Production
Particularly, the IIP covers three major sectors with different weights:
- Manufacturing: 77.63% (809 items)
- Mining: 14.37% (29 items)
- Electricity: 7.99% (1 item)
Eight Core Industries (Weight in IIP: 40.27%)
Another key point is that these industries form the backbone of India’s industrial production and are listed below in decreasing order of weight:
- Refinery Products
- Electricity
- Steel
- Coal
- Crude Oil
- Natural Gas
- Cement
- Fertilisers
Significance of the Index of Industrial Production
The Index of Industrial Production is significant because it:
- It acts as a leading indicator of economic performance.
- It also helps the RBI and government in framing monetary and fiscal policies.
- It guides industries and investors in tracking demand cycles.
- Moreover, it provides insights into employment potential and capacity utilisation.
- It also highlights the sectoral imbalances, enabling corrective policy measures.
What are the Limitations of the Index of Industrial Production
While the IIP is valuable, it has its drawbacks:
- In the first place, it excludes services and informal sectors, which form a large part of India’s economy.
- Secondly, the base year revisions are often delayed, reducing accuracy.
- Most importantly, there are data collection lags, leading to revisions in quick estimates.
- Emerging sectors like renewable energy or new-age electronics are not fully captured.
Monthly Highlights (July 2025 Snapshot)
- General Index: 155.0 (vs. 149.8 in July 2024).
- Sectoral Indices: Mining 107.7, Manufacturing 156.9, Electricity 221.5.
- Use-Based Growth:
- Infrastructure/Construction Goods: +11.9%
- Consumer Durables: +7.7%
- Intermediate Goods: +5.8%
- Capital Goods: +5.0%
- Primary Goods: –1.7%
- Consumer Non-Durables: +0.5%
- Infrastructure/Construction Goods: +11.9%
This breakdown reveals that infrastructure and consumer demand have been the main growth drivers in July 2025.
Conclusion
In essence, the Index of Industrial Production remains one of the most crucial indicators of India’s economic health. Despite its limitations, it offers timely insights into sectoral growth and challenges. The latest data, showing a modest but steady recovery in July 2025, reflects both resilience and the need for structural reforms. Hence, the policymakers and investors must carefully examine these numbers, as they hold the key to understanding India’s industrial momentum in the months ahead.
FAQs on Index of Industrial Production
It measures short-term changes in industrial output across the mining, manufacturing, and electricity sectors, using a fixed base year.
It acts as an early indicator of economic health, guiding monetary policy, fiscal measures, as well as investment strategies.
It excludes services and the informal economy, suffers from data delays, and may not capture rapidly evolving sectors.
The Quick Estimate is released on the 28th of every month (or the next working day if the 28th is a holiday).
The manufacturing sector holds the highest weight at 77.63%, making it the most influential driver of the index.
CITATIONS
- India’s Index of Industrial Production records growth of 3.5% in July 2025
- QUICK ESTIMATE OF INDEX OF INDUSTRIAL PRODUCTION AND USE-BASED INDEX FOR THE MONTH OF JULY 2025
Prelims Question (MCQ)
Q. With reference to the Index of Industrial Production (IIP), consider the following statements:
- The IIP is released by the Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation (MoSPI).
- The manufacturing sector carries the highest weight in the IIP.
- The IIP covers both the industrial and services sector output.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, and 3
Mains Question
Q. The Index of Industrial Production (IIP) is often used as a key indicator to measure India’s industrial health. Discuss the significance of IIP as an economic indicator and critically examine its limitations in capturing the true picture of India’s growth story.
