The Indian economy is evolving at a pace that demands a more refined and comprehensive approach to tracking industrial activity. The Index of Industrial Production, a key barometer of the country’s industrial performance, is long overdue for an overhaul. Set to launch in February 2026, the new IIP series aims to address existing data gaps and enhance the accuracy of industrial growth measurement. The government is undertaking a significant revision to bring the index in line with global best practices, incorporating previously overlooked sectors such as water collection, treatment and supply, sewerage, and waste management.
The ministry of statistics and programme implementation (MoSPI) has been entrusted with leading this transformation, ensuring that India’s industrial data framework is more reflective of contemporary economic realities. Additionally, activities such as quarrying of minor minerals and gas supply are also under consideration for inclusion, further broadening the index’s scope.
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What is IIP and why an update
The IIP reflects growth rates across different industry groups within a given period. It serves as a composite indicator measuring industrial growth across three broad sectors—Mining, Manufacturing, and Electricity—as well as use-based classifications such as Basic Goods, Capital Goods, and Intermediate Goods. The index plays a crucial role in the compilation of Gross Value Added (GVA) for the manufacturing sector in India’s Gross Domestic Product (GDP).
The IIP is compiled and published monthly by the Central Statistical Organisation (CSO) based on data provided by a fixed set of firms within a specified timeline. The current IIP series, based on 2011-12, includes 839 items: 29 from mining, 809 from manufacturing, and one from electricity. The data is sourced from 14 agencies, with 50-55% coming from core sector data compiled by the Commerce Ministry’s Office of the Economic Adviser.
However, critics, including former Chief Statistician of India and MoSPI Secretary T.C.A. Anant, have questioned the reliability of IIP as an economic indicator. Being a pre-independence statistical product, the IIP suffers from outdated data collection methodologies, reliance on legacy agencies, and a rigid system that fails to capture new industrial establishments and changes in product composition. As a result, there is often a significant divergence between IIP data and the Annual Survey of Industries (ASI), leading to underestimations in key economic assessments.
The lengthy revision process—which takes five to six years—further aggravates the issue, as data on non-responsive or closed firms remains unaddressed. To ensure that IIP remains a relevant measure of industrial growth, regular updates to its base year and methodology are essential.
Matching international standards
India’s current IIP methodology lacks data on crucial activities such as waste collection, water treatment, and sewerage, even though these sectors are gaining prominence due to climate change and sustainability concerns. Many countries have already incorporated these sectors into their industrial measurement frameworks. Although India’s national accounts track gas supply, the absence of these additional activities limits the accuracy of the country’s economic assessments.
Additionally, data on quarrying of minor minerals is not maintained by the Indian Bureau of Mines but instead by state governments. However, state-level data is often inconsistent and unreliable, particularly regarding the excavation of sand and other minor minerals, making it difficult to compile accurate national figures.
India’s economic activity measurements adhere to the System of National Accounts (SNA), an internationally recognised framework. The latest SNA, adopted in 2009, is undergoing further revision, alongside the International Standard Industrial Classification of All Economic Activities (ISIC), which is now progressing toward its fifth edition. As part of the IIP revision, India aims to align with these evolving standards by covering currently missing activities, provided they hold significant economic weight.
Leveraging GST data for a robust IIP
The upcoming revision will adjust these activities within the existing 23 manufacturing categories while updating the IIP’s base year from 2011-12 to 2022-23. To ensure a comprehensive revision, expert panels are working on refining methodologies and incorporating additional data sources.
To address IIP’s limitations, the government must explore the integration of Goods and Services Tax (GST) data. GST filings provide high-frequency, near-universal coverage of manufacturing establishments, offering a more accurate and timely assessment of production trends. Leveraging GST data could transform IIP into a more dynamic and reliable indicator of industrial performance.
Policymakers could benefit from real-time insights, similar to how monthly merchandise trade data aids in economic decision-making. This would allow for more effective policy interventions and a clearer understanding of India’s industrial landscape.
The government’s initiative to revamp IIP presents a timely opportunity to modernise India’s industrial data framework. However, the effectiveness of this overhaul remains to be seen. Whether the revised IIP of 2026 will provide a more precise and holistic measure of industrial growth depends on how well these updates are implemented and whether key data gaps are effectively addressed.