What does the new 2011-12 IIP series tell us about the Indian manufacturing sector?

Published By: National Institute of Public Finance and Policy (N | Published Date: November, 29 , 2017

The paper discusses the changes in the new 2011-12 base year series of the Index of Industrial Production (IIP) to ask, whether the new series has improved our under-standing of the growth in the manufacturing sector. A simple framework has been developed to separately estimate the contribution of value and volume based commodities in the growth of the manufacturing index. The paper finds that growth in value based commodities contributes significantly in moving the index in both direction and that high growth in value based commodities coincides with periods of low inflation. Findings also show that movements in the IIP Index are increasingly influenced by the trends of WPI as growth in value based commodities may inflate or become subdued, given the fall or rise in the WPI index. As a case study of value based commodities, the paper compares the trends of IIP (Pharmaceuticals) and real Net Sales of firms in the pharmaceuticals sector. The findings show that real Net Sales and IIP have contrasting trends. Such divergent trends between two measures of industrial activity raise crucial questions on the representativeness of the IIP.

Author(s): Radhika Pandey, Amey Sapre, Pramod Sinha | Posted on: Dec 12, 2017 | Views() | Download (329)

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