IIP Index Of Industrial Production

1. INDEX OF INDUSTRIAL
PRODUCTION
BY
A.S.L.MANASA
SOURAV BISWAS
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082

2. AGENDA
 INTRODUCTION
 CALCULATION
 CLASSIFICATION OF INDUSTRIES
 FACTS AND FIGURES
 IMPACT OF IIP ON INDIAN ECONOMY
 FUTURE OUTLOOK
 USES OF IIP
 PROBLEMS WITH IIP
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082

3. INTRODUCTION
Definition of IIP :
 IIP is a number which tells about how industries
are performing over a period of time
 Calculated by Center for Statistical Operations
(CSO)
 Commenced in 1937
 Recently revised in 2004-2005
 It is the leading indicator of economic growth
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082

4. CALCULATION OF IIP
It is calculated using LASPEYERS formula
IIP = ∑ ( W1 * R1 )
∑ W1
Where,
R1 = P1 X 100
P0
W1 = Base year weights
P1 = Production in current year
P0 = Production in base year
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082

5. COMPONENTS OF IIP
CLASSIFICATION
MINING (15%)
ELECTRICITY (10%)
MANUFACTURING (75%)
BASIC GOODS
CAPITAL GOODS
INTERMEDIATE GOODS
CONSUMER
DURABLES
CONSUMER NON
DURABLES
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082

6. Contd……
CSO gets data from
 Manufacturing : Dept. of Industrial Policy &
Promotion
 Electricity : Central Electric Authority
 Mining : Indian Bureau of Mining ( Nagpur )
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082

7. USES OF IIP
 By central govt. for planning and decision
making
 Predicts future turning points of business
cycles
 Investors can assess the impact of economy
on their overall portfolio
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082

8. PROBLEMS WITH IIP
LASPEYERS formula have following draw backs
 Subsequent change in weights is not accounted
 Change in quality of goods is not considered
 Addition of new goods is not accounted till the next
revision
 Substitution effect is not considered
Data collection Problem :
 Data from unorganized sectors is difficult to obtain
 No standardized data collection & production
techniques
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082

9. FACTS AND FIGURES
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 2010 2011 2012 2013
IIP %
RETURN %
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082

10. IMPACT OF IIP ON INDIAN ECONOMY
Submitted to : RVM Finishing School & Consultancy

11. FUTURE OUTLOOK
Its dependent on following factors :
 Fed Reserve decision on QE3
 Stabilization of Chinese economy
 Early resolution of EU crisis ( Highly unlikely )
 Rupee stabilization
 Domestic demand
 Government policies
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082

12. CONCLUSION
 Low IIP values have direct effect on stock
prices
 Lower employment
 Fundamentally strong stocks becomes
undervalued
 FIIs starts pulling out money from Indian
stock-market
 Rupee depreciates with respect to USD
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082

13. Contd….
 Growth in IIP numbers are good signs for
cement and steel industries
 Have a positive impact on the banking sector
 Lower supply coupled with lower demand can
have catastrophic impact on stock market and
was one of the main reasons for drop in
Sensex from 20000 to 8000 in 2008.
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082

14. THANK YOU
Submitted to : RVM Finishing School &
Consultancy www.rvmfinishingschool.com
9550812082