IIP
Index of Industrial Production (IIP) is a monthly indicator published by India's NSO that measures the quantum of industrial output across mining, manufacturing, and electricity sectors, reflecting the growth momentum of the industrial economy.
The Index of Industrial Production is one of India's most important high-frequency economic indicators, bridging the gap between monthly PMI surveys and quarterly GDP estimates. Published around six weeks after the reference month, IIP covers three broad sectors: manufacturing (77.6% weight), mining (14.4%), and electricity (8%). Within manufacturing, 23 industry groups are tracked, including basic metals, food products, textiles, chemicals, and machinery. The current IIP uses 2011–12 as the base year.
IIP data is notoriously volatile month-to-month due to working-day effects, seasonal patterns, and base effects from year-ago periods. Analysts routinely smooth the series using three-month or six-month moving averages to identify the underlying trend. Capital goods — a sub-index tracking output of machinery and equipment — is particularly erratic but is watched as a proxy for private sector investment activity. Consumer durables output reflects household spending on appliances, vehicles, and electronics, making it a useful barometer of urban consumer demand.
India's IIP growth showed a pronounced V-shaped recovery after the pandemic. Industrial output contracted by approximately 8.4% in FY2020–21 before rebounding 11.3% in FY2021–22. Subsequent years saw moderate growth averaging 5–6%, constrained partly by global demand slowdowns affecting export-oriented industries and partly by the investment cycle that was still gaining momentum. Infrastructure-linked industries — cement, steel, and construction materials — showed stronger performance tied to the government's capex push, while consumer discretionary segments tracked urban and rural income cycles.
For equity investors, IIP data provides sector-level insights that feed directly into earnings models. Strong IIP growth in electrical equipment or capital goods often signals a positive order environment for companies in those segments. Weakness in consumer durables or textiles may presage margin pressure or inventory build-up for listed companies in those sub-sectors. When IIP data contradicts PMI trends — for example, strong PMI but weak IIP — it is typically explained by timing differences and the different firm samples used in each survey.
A structural limitation of IIP is that it covers only the industrial sector, which accounts for roughly 28% of India's GVA. The services sector — which is larger and faster-growing — has no equivalent monthly output indicator of comparable quality, making IIP a partial window into the overall economy. Investors and economists therefore use IIP alongside services PMI, GST collection data, railway freight statistics, and e-way bill volumes to construct a more comprehensive real-time picture of economic activity.