It is a composite indicator of the general level of industrial activity in the economy which measures the volume of production that takes place in the country every month. Based on the performance measured every month, a general increase or decrease in the industrial activity can be measured.
 

It is compiled and published monthly by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.

It contains 407 items taken from 3 broad sectors like manufacturing, mining, and electricity. The industry sectors that it contains along with their respective weights are as follows 

The goods in IIP can be further categorized as (i) Primary goods, (ii) Capital goods, (iii) Infrastructure/ construction goods, (iv) Intermediate goods, (v) Consumer durables, and (vi) Consumer non-durables.

 

Within IIP, 8 industries are classified as core industries since 1973 when Industrial policy resolution was adopted. They are 

• Coal 
• Electricity 
• Crude oil 
• Cement 
• Natural gas 
• Steel 
• Refinery products 
• Fertilizers 

These comprise 40.27% of the weight of total items included in the Index of Industrial Production (IIP). The eight core sector industries in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.

Base Year for IIP is 2011-2012.
 

Significance of IIP is that it is used by government agencies including the Ministry of Finance, the Reserve Bank of India, etc, for policy-making purposes. IIP remains extremely relevant for the calculation of the quarterly and advance GDP (Gross Domestic Product) estimates.