Context

• As per data released by the government on September 30, 2024, the combined index (ICI) of eight core industries saw a provisional decline of 1.8 per cent in August 2024 compared to August 2023, the lowest in nearly four years.

Key Highlights:

• The combined index of eight core sector industries has a 40 per cent weightage in the Index of Industrial Production.
• According to ICRA, the growth rate of India's industrial production (IIP) will decline sharply.

Index of Industrial Production (IIP)

• India's Index of Industrial Production (IIP) is a key indicator of the growth of the country's industrial sector. This index measures the changes in the monthly production of goods and services produced in various industries.

Why IIP is important?

• economic indicator of the economy's Health: IIP is an important economic indicator that reflects the country's overall economic growth.
• Policy making: Governments use IIP data to make policy decisions, such as introducing incentive schemes to boost industrial growth.
• Signal for investors: Investors use IIP data to make decisions about investing in India.

Factors affecting IIP:

• Government policies: Factors such as the government's industrial policies, tax policies and investments in infrastructure affect IIP.
• Global economy: Global economic activities, raw material prices and foreign investments also affect IIP.
• Seasonal factors: Some industries are affected by seasonal factors, which can cause fluctuations in IIP.

Eight Core Sectors of Industries:

1. Coal: A major source of energy production in India.
2. Crude Oil: Crude oil is used to produce petroleum products.
3. Natural Gas: Used for power generation and as fuel in industries.
4. Fertilizer: Essential for agricultural production.
5. Steel: An important raw material for the construction and automobile industries.
6. Cement: An important material for the construction industry.
7. Electricity: An essential input for all industries.
8. Refinery Products: Refinery products, also called petroleum products, are obtained from the process of converting crude oil into various useful products, e.g., petrol, diesel, aviation fuel, etc.