India’s revised Index of Industrial Production (IIP) series will not directly change the country’s GDP estimates, even as the government upgrades the methodology used to measure industrial output, Saurabh Garg, Secretary of Ministry of Statistics and Programme Implementation (MoSPI), Government of India, told CNBC-TV18.Garg clarified that while the new IIP series adopts a broader use of value-based measurements and the Producer Price Index (PPI), it should not be seen as a change in the way Gross Domestic Product (GDP) or Gross Value Added (GVA) is calculated.
“The IIP doesn’t get directly reflected into the GDP or GVA. The IIP also uses the weights, which are based on the national accounts. So, in any case, the causality, if at all, I would say it goes from GDP to IIP rather than the reverse,” Garg said.
The clarification comes after the government unveiled a revised IIP series that expands the use of value-based measurements for industrial products and replaces the Wholesale Price Index (WPI) with the Producer Price Index (PPI) as the deflator for such items.Garg explained that despite these methodological improvements, the IIP continues to remain an output measure rather than a value-added measure.”IIP is an output measure only, and doesn’t calculate value, and will continue. The older series was an output measure, and the new series is also only an output measure,” he said.The revised series increases the share of products measured on a value basis to better capture industries where production volumes are difficult to quantify. Under the new methodology, 234 out of 463 items, accounting for 36% of the index weight, are measured using value, compared with 109 out of 407 items, representing 19.2% of the weight, in the previous series. This approach is used for products with varying specifications, significant quality differences or production cycles extending beyond a month.Instead of using WPI, the revised IIP now relies on the Producer Price Index to remove the impact of prices from value-based products and estimate actual output. Garg said PPI is internationally regarded as a better measure because it reflects prices at the factory gate.
“Conceptually there is no difference between the two series,” he said, adding that value-based items in the older series were also deflated to measure output rather than prices.The statistical overhaul is part of a broader effort to modernise India’s national accounts. Garg said MoSPI is also working to incorporate the output PPI into GDP calculations after completing the required validation exercises.”Within the next few months, we hope to be able to use the output PPI to deflate the GVA also on an output basis,” he said, while noting that the newly introduced input PPI is still under evaluation.On the services side, Garg said the newly launched services PPI currently covers seven categories because of data availability and feasibility. The index is expected to expand over time as more sectors and reliable datasets become available.He also explained that for banking, MoSPI will rely on the banking services price index rather than the banking services contribution index, as the former is more relevant for measuring price changes in GDP calculations.Addressing questions on data releases, Garg said inflation and industrial production numbers are published on different schedules because they rely on different collection methods. While Consumer Price Index (CPI) data is collected directly by field staff and released within 12 days of month-end, IIP depends on production data submitted by factories, which requires validation before publication.Watch the full conversation hereHe added that India has already reduced the IIP release timeline from 42 days to 28 days, making the country’s industrial production data among the fastest released globally.Garg cautioned against reading too much into the newly released services Producer Price Index, particularly the decline in prices seen in some financial services categories. He said any impact on GDP estimates would depend on sectoral weights and broader input-output calculations, making it too early to draw conclusions.Catch all the latest updates from the stock market here
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