For more accurate data, IIP to use chain-based approach
The government is set to revamp the Index of Industrial Production. A chain-based mechanism will be adopted for enhanced data accuracy. Weights will be revised more frequently, potentially every 1.5-2 years. The base year will be updated to 2022-23, with a new series expected in 2026-27. Retail inflation item weights will also be updated more regularly.
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New Delhi: The government plans to switch to a chain-based mechanism for the Index of Industrial Production (IIP) to enhance the accuracy and relevance of data.The ministry of statistics and programme implementation (MoSPI) is exploring the idea of a chain-based IIP index, where weights will be revised more frequently to reflect changes within the industrial sector.The weights assigned to items in the IIP are derived from the Annual Survey of Industries (ASI) conducted by MoSPI."We plan to revise the weights every 1.5-2 years," said a government official. The official also mentioned that a back series will be maintained for comparison.A chain-based index measures economic change over time by linking successive periods with the previous year's reading.At present, the ministry is working to update the base year to 2022-23 from 2011-12, with weights based on the ASI 2022-23. The new series is likely to be released in 2026-27.The chain-based index is followed by many countries internationally and a previous working group on IIP considered this approach when revising the base year in 2017. However, it found challenges in updating weights every time the industry code structure is revised.In the current IIP series, manufacturing accounts for 77.633 weight, followed by mining at 14.373 and electricity at 7.994.Additionally, the ministry aims to update item weights in the retail inflation basket every four years, using data from the Household Consumption Expenditure Survey (HCES). The ministry has also decided to conduct HCES every three years instead of the current five years. The most recent survey was conducted in 2023-24.While the government initially decided to use HCES 2022-23 data to update weights for the new Consumer Price Index (CPI) series, it is now considering HCES 2023-24 (August-July), as more recent data is available.
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