Why India's new industrial index matters more than ever to growth

With a 2022-23 base year, the revamped IIP captures emerging industries, renewable energy and changing production patterns more accurately

After revising the Index of Industrial Production (IIP) base year to 2022-23 and releasing the updated series on Monday, the Ministry of Statistics and Programme Implementation (Mospi) has completed base-year revisions for all three key macroeconomic indicators within a reasonable timeframe. This is a creditable achievement. The revised IIP shows output growth of 4.9 per cent in April 2026 over the same month last year.

 

IIP is a key high-frequency indicator — especially now, as India pushes to strengthen manufacturing under its “Make in India” campaign. The country’s industrial economy is changing faster than at any point in the last three decades. Production lines are being automated, renewable energy is reshaping the power sector, global value chains are shifting, and newage industries — from electronics to rare-earth processing — are scaling up. Until now, however, the IIP remained anchored to an industrial structure based on 2011-12.

 

The revision of the IIP base year to 2022-23 marks the most ambitious overhaul of the index in years. It is not just a routine statistical update, but a structural reset that will shape how India measures industrial dynamism in the coming years.

 

Industrial production today looks very different from a decade ago. Technological innovation, large-scale digitisation, automation, the rapid adoption of renewable energy, and shifting global supply chains have changed how industries operate. An outdated base year meant the index increasingly underrepresented fast-growing and emerging sectors, while giving disproportionate weight to those in relative decline. As a result, policy signals were often blurred, and the IIP struggled to reflect the economy’s true pulse.

 

The new base year of 2022-23 aligns the IIP with gross domestic product (GDP), the consumer price index (CPI), and the wholesale price index (WPI), improving coherence across India’s key macroeconomic indicators.

 

I have been associated with the monthly production of the IIP, first when its base year was 2004-05 and later when it was revised to 2011-12. Before the base-year revision, users raised several concerns: An outdated industrial basket; a decline in response rates from production units as many closed due to product obsolescence; the non-inclusion of items that had entered production; and a lack of alignment between the IIP’s annual manufacturing growth rates and those reported by the Annual Survey of Industries (ASI), whose results often came with a lag of three years or more.

 

Some of these issues that remained unresolved earlier have now been addressed.

 

The new basket draws on the ASI for 2021-22 and 2022-23, ensuring it reflects today’s production landscape. It includes rare-earth minerals, which are critical for electronics and green technologies, and adds minor minerals, mirroring India’s infrastructure push. The electricity segment has been expanded to track renewable and non-renewable generation separately. For the first time, the IIP also covers gas distribution, water supply, sewerage, and waste management. Taken together, these changes move the index decisively towards a 21st-century measure — one that better captures India’s shift towards clean energy, urban infrastructure, and advanced manufacturing.

 

Greater granularity is an added advantage for policy, as it helps track shifts in industrial activity more precisely. The item basket has been revamped to cover 463 item groups, including products such as cards with magnetic strips, CCTV cameras, articles of non-woven textiles, and parts of aircraft and spacecraft — items that are particularly relevant in the current context. At the same time, products such as kerosene and fluorescent tubes have been rightly dropped.

 

One should hope that future revisions of the IIP base year are carried out on time, so that the index continues to reflect the evolving structure of the economy.

 

The author is former director general, Mospi, and currently president of Center of Data for Economic Decision-making, PIF