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INDEX OF INDUSTRIAL PRODUCTION
BY A.S.L.MANASA
SOURAV BISWAS
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AGENDA INTRODUCTION CALCULATION CLASSIFICATION OF INDUSTRIES FACTS AND FIGURES IMPACT OF IIP ON INDIAN ECONOMY FUTURE OUTLOOK USES OF IIP PROBLEMS WITH IIP
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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
CALCULATION OF IIP It is calculated using LASPEYERS formula IIP = ∑ ( W1 * R1 ) ∑ W1 Where, R1 = P1 X 100 P0W1 = Base year weightsP1 = Production in current yearP0 = Production in base year Submitted to : RVM Finishing School &
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COMPONENTS OF IIP
CLASSIFICATION
MINING (15%)
ELECTRICITY (10%)
MANUFACTURING (75%)
MINING (15%)
ELECTRICITY (10%)
MANUFACTURING (75%)
CONSUMER DURABLES
CONSUMER NON DURABLES
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Contd……
CSO gets data from Manufacturing : Dept. of Industrial Policy &
Promotion Electricity : Central Electric Authority Mining : Indian Bureau of Mining ( Nagpur )
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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
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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
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FACTS AND FIGURES
2005 2006 2007 2008 2009 2010 2011 2012 20130
2
4
6
8
10
12
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
IIP %RETURN %
IMPACT OF IIP ON INDIAN ECONOMY
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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
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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
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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.
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THANK YOU
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