The government plans to overhaul the IIP to take account of factory closures | Business News

“…In the current series, the weight of the closed plant reaches about 8.9 percent of the index. This situation poses challenges to maintaining the continuity of the industrial investment chain. The continuation of plants that are no longer operational or no longer represent actual production leads to increased reliance on estimation or quotation methods. To meet these challenges, plant replacement has become necessary,” said the discussion paper prepared by the Ministry of Investment and Public Industries. The department has called for comments on the proposed change by November 25, so that the final method adopted for calculating the IIP is “informed, robust and broadly supported.”

The IPI is a key indicator of the Indian economy and is one of the monthly or high-frequency data published by the government, the other being the Consumer Price Index (CPI), on the basis of which the headline inflation figure in the retail sector is calculated. Both the IIP and CPI numbers are of great interest to policymakers to understand the trajectory of the economy and fundamental developments.

Write in column for Indian Express Last month, Ministry of Industry and Construction Secretary Saurabh Garg and Professor Mridul Sagar of the Indian Institute of Management, Kozhikode – who is also the Chairman of the Technical Advisory Committee for the Industrial Investment Program Review – mentioned replacing the shuttered factories as one of the major improvements planned. Internationally, plant replacement is an accepted practice.

Replacement process

For a plant to be included in MoSPI’s IIP sample, it must make the same item as the plant being removed or an item that falls within the same group. Furthermore, the gross value added or total output value of the new plant must be close to the plant it replaces, which indicates that the two plants must be the same size.

Furthermore, the new plant must be operational for at least 12 months. 12 months production data is required before introducing the new plant and removing the old plant.

“Until such overlapping data are obtained, ‘zero’ or temporarily imputed values ​​may be used in the series. Thus, depending on timing, a few months of ‘zero’ production may appear before substitution is reversed,” the discussion paper said.

Wider review

The proposed change is part of a wider review of the IIP – which was last revised in 2017 – with the Department of Social Insurance also updating the base year to 2022-23 from 2011-12. Investment investment data for one month is released on the 28th of the following month and is currently compiled on the basis of production figures from 14 source agencies covering 407 items or item groups from three sectors: mining, manufacturing and electricity. Items are also divided into six different use categories: primary goods, capital goods, infrastructure or construction goods, intermediate goods, consumer durables, and consumer nondurables.

The revised IIP figures with 2022-23 as the base year are scheduled to be released from May 2026. According to the latest data, India’s industrial growth as per IIP stood at 4 per cent in September. In the first half of 2025-26, industrial production was 3 percent higher than in the first six months of 2024-25, lower than the 4.1 percent growth recorded last year.