India’s industrial production clocked a 5.1 per cent growth in May this year compared to the same month of the previous year on the back of a strong growth in the manufacturing sector and a surge in the electricity & gas supply sector during the month, according to the new series data released by the Ministry of Statistics
The industrial growth rate accelerated in May from 4.9 per cent in April.
The manufacturing sector, which accounts for more than three-fourths of the index of industrial production (IIP), posted an impressive 5.5 per cent growth during May compared to the same month of the previous year. The sector plays a key role in providing quality jobs to the young graduates passing out from the country’s engineering institutes and universities.
Within the manufacturing sector, 16 out of 23 industry groups have recorded a positive growth in May over the same month last year. The top three positive contributors for the month in this segment are manufacture of motor vehicles, which recorded a 14.5 per cent growth, manufacture of electrical equipment ( 20.8 per cent), and manufacture of basic metals ( 4.6 per cent).
The electricity and gas supply sector recorded a 9.9 per cent increase during May while water supply, sewerage & waste management posted a 5.5 per cent growth.
However, the mining sector proved to be a laggard, posting a negative growth of (-) 1.6 per cent during the month.
The figures on use-based classification show that the production of capital goods, which comprise machines used in factories, jumped by a robust 12.9 per cent in May this year. This segment reflects the real investment taking place in the economy, which has a multiplier effect on the creation of jobs and incomes going ahead.
There was also a 7.2 per cent increase in the production of consumer durables such as electronic goods, refrigerators, and TVs during April, reflecting the higher consumer demand for these items amid rising incomes. Consumer non-durables such as soaps and cosmetics posted a 3.6 per cent growth during the month.
The infrastructure and construction goods sector also recorded a growth of 5.9 per cent during the month, driven by the government’s big-ticket investments in highways, ports, and railway projects which create large-scale employment and drive up the overall economic growth rate.
The Ministry of Statistics and Programme Implementation (MoSPI) has decided to adopt the Output Producer Price Index (Output PPI) as a deflator in place of the Wholesale Price Index (WPI) for item groups for which output is collected in value terms. This affects 234 out of the 463 item groups in the IIP basket, representing 36.02 per cent of the total index weight, the official statement said.
The ministry has now revised and released the entire IIP 2022-23 series with Output PPI, and it supersedes the earlier WPI-based IIP 2022–23 series released on June 1, the statement said.
The ministry had released the new series of the All India Index of Industrial Production (IIP) with base year 2022–23 on June 1, using the WPI as the deflator. Subsequently, the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, released the Output PPI series with base year 2022–23 on June 15. As Output PPI is a new and important indicator for capturing producer-level prices, it has significant implications for compiling IIP.
MoSPI said the transition from the WPI to the Output PPI assumes significance because a part of industrial production in the IIP is reported in value terms. Out of the 463 item groups included in the IIP basket, 234 item groups, accounting for 36.02 per cent of the total weight, are compiled using value-based production data.
Other reasons for adopting the new series are that Output PPI provides a more granular price structure than the WPI. For value-based items, use of Output PPI will improve the estimation of real output; adoption of output PPI is in line with international best practices and the recommendation of the Technical Advisory Committee (TAC) on the base revision of IIP.
Besides, such major changes in the IIP series can be accommodated only at the time of base year revision. As IIP is an important input in the estimation of quarterly Gross Domestic Product (GDP), it will facilitate eventual adoption of PPI-based volume estimation methods in the National Accounts, the statement added.
MoSPI has now decided to discontinue the use of WPI and has adopted the Output PPI as the deflator for the new IIP series (Base: 2022–23).
