New Delhi: Ahead of the rollout of the new data series next week, the statistics ministry has proposed a structural revamp of the Index of Industrial Production (IIP).
The proposed changes go well beyond a routine base-year revision. The ministry wants the IIP — one of the country’s most closely watched high-frequency indicators — to reflect a rapidly evolving industrial economy shaped by renewable energy, digital manufacturing, critical minerals, automation and changing supply chains.
The recommendations have been made in the Report of the Technical Advisory Committee for Base Year Revision of All India Index of Industrial Production (TAC-IIP), submitted to the Ministry of Statistics and Programme Implementation (MoSPI). At the heart of the revamp is the decision to shift the IIP base year to 2022-23 from 2011-12, aligning it with the new GDP, WPI and proposed Producer Price Index series. The panel has also recommended introducing a chain-linked IIP alongside the conventional fixed-base index to better capture structural changes in industry.
The key “improvements” recommended in the report are:
introduction of chain-linked IIP in addition to the fixed base index
substitution and augmentation of factories to address the problems of creative destruction of firms and products amid changing production lines that imparts a downward bias to output measurement
Broader Industry Lens
The overhaul will sharply expand the scope of the IIP basket, increasing item groups to 463 from 407. The manufacturing basket alone will add 120 new item groups while removing 64 outdated ones.
One of the most consequential changes is the inclusion of utilities such as gas supply, water supply, sewerage and waste management within the industrial production framework. India’s current IIP largely tracks mining, manufacturing and electricity generation, leaving out a large swathe of utility services recognised globally as industrial activity.
The report argued that industrial statistics must evolve with the economy itself. “New products, emerging technologies, evolving production systems, and changing patterns of industrial activity demand a more dynamic and responsive methods of measurement. Industrial statistics cannot remain fixed while industries themselves are rapidly changing,” it said.
The panel has also recommended splitting electricity generation into renewable and non-renewable categories, a move that could significantly improve visibility of India’s clean-energy transition.
“The TAC-IIP also felt that MoSPI can try dissemination of more granular electricity generation data by type of electricity, so that its progress on renewable energy can be tracked by types of clean fuels,” the report noted.
The mining component is also set for expansion. The panel has recommended inclusion of minor minerals and rare earth minerals, reflecting their rising strategic importance in infrastructure, electric mobility, electronics and defence manufacturing.
The committee has additionally decided to retain “not elsewhere classified” or n.e.c. items in the manufacturing basket, arguing that such categories increasingly capture emerging and specialised products reshaping industrial activity.
Data System Reset
The proposed reforms also seek to modernise the statistical architecture underpinning the IIP.
The TAC-IIP has recommended replacing the Wholesale Price Index with the Producer Price Index as the preferred deflator once the latter becomes operational. Until then, WPI will continue as an interim benchmark.
The report also lays down a formal mechanism for substitution and augmentation of factories in the reporting panel — aimed at addressing a long-standing criticism that the IIP often fails to fully capture industrial churn caused by plant closures, technological shifts and new production lines.
“The committee emphasized that timely substitution of non-operational units and augmentation with comparable and representative factories is essential to maintain the relevance, stability, and representativeness of the index,” the report said.
The panel has further proposed separate production indices for the unincorporated manufacturing sector and eventual publication of seasonally adjusted IIP data, although both recommendations may take time to operationalise.
The broader objective, according to the report, is not merely statistical revision but a redesign of India’s industrial measurement framework to match the realities of a rapidly transforming economy. It’s “part of a larger process of modernizing India’s economic data systems to better reflect present-day realities”.
(Cover photo by Zoshua Colah on Unsplash)