IIP set for major overhaul, expansion

Mobile phones are in, typewriters are out as the government revises the Index of Industrial Production (IIP) to make this key barometer of economic performance more relevant and accurate.

To this end, the government is changing the base year to 1999-2000 from the present 1993-94, expanding the number of items measured in the index from 543 to 919 and reassigning weights to each industry segment.

"We are in discussions with various stakeholders and hope to start providing the new data from next month," a government official involved in the process told Business Standard.

The revision needs to be approved by the eight-member National Statistical Commission headed by economist Suresh Tendulkar.

In the recent past, the IIP numbers have come in for some criticism from analysts and sections of the industry they cover.

For instance, consumer durable goods have shown a consistent decline in production for four months till August, the last available IIP data. The industry has said the data are misleading and not in tune with actual production in this segment.

The other issue is over the items included in the index. Some of them "" like typewriters "" have outlived their importance.

The IIP base year was originally set at 1937. It has since been revised six times, the last being in May 1998.

Inflation index to follow suit

Even as the IIP will move to a new base year, sources said the Wholesale Price Index (WPI) inflation indicator, which dominated the headlines most of this year, would also move to a new base year of 1999-2000.

The WPI is currently calculated on a weekly basis, with 1993-94 as the base year. India's national accounts are already on the 1999-2000 base year.

Once the IIP and WPI also move to the new base year, these three key macro-economic indicators will have the same base year and, therefore, greater relevance.