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

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  • Pandey, Radhika

    (National Institute of Public Finance and Policy)

  • Sapre, Amey

    (National Institute of Public Finance and Policy)

  • Sinha, Pramod

    (National Institute of Public Finance and Policy)

Abstract

We discuss 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. We develop a simple framework to separately estimate the contribution of value and volume based commodities in the growth of the manufacturing index. We find that growth in value based commodities contributes significantly in moving the index in either 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, we compare the trends of IIP (Pharmaceuticals) and real Net Sales of firms in the pharmaceuticals sector. Our 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.

Suggested Citation

  • Pandey, Radhika & Sapre, Amey & Sinha, Pramod, 2017. "What does the new 2011-12 IIP series tell us about the Indian manufacturing sector?," Working Papers 17/215, National Institute of Public Finance and Policy.
  • Handle: RePEc:npf:wpaper:17/215
    Note: Working Paper 215, 2017
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    References listed on IDEAS

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    1. Amey Sapre & Rajeswari Sengupta, 2017. "Analysis of Revisions in Indian GDP Data," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 18(4), pages 129-172, October.
    2. Halan, Monika & Sane, Renuka, 2017. "Regulating consumer finance: Do disclosures matter? The case of life insurance," Working Papers 17/212, National Institute of Public Finance and Policy.
    3. Barua, Rashmi & Goel, Prarthna & Sane, Renuka, 2017. "The Effect of Age-Specific Sex Ratios on Crime: Instrumental Variable Estimates from India," Working Papers 17/214, National Institute of Public Finance and Policy.
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    Cited by:

    1. Banerjee, Shesadri & Bhattacharya, Rudrani, 2017. "Micro-level Price Setting Behaviour in India: Evidence from Group and Sub-Group Level CPI-IW Data," Working Papers 17/217, National Institute of Public Finance and Policy.
    2. Hazarika, Bhabesh, 2017. "Decomposition of Gender Income Gap in Rural Informal Micro-enterprises: An Unconditional Quantile Approach in the Handloom Industry," Working Papers 17/216, National Institute of Public Finance and Policy.
    3. Rao, M. Govinda, 2017. "The Effect of Intergovernmental Transfers on Public Services in India," Working Papers 17/218, National Institute of Public Finance and Policy.

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