India has announced its intention to revise the Index of Industrial Production (IIP) to better reflect the country’s manufacturing activity. The Ministry of Statistics intends to drop inactive factories – factories that have not submitted any production during three consecutive months – from the IIP sample, instead substituting them for active factories. The Ministry recognized that inactive factories typically distort the data because they are counted as “sample” factories. Inactive factories currently represent about 8.9 percent of the IIP sample. The IIP will also transition its base year from 2011-2012 to 2022-2023 to better reflect contemporary industry and production practices.
Why the Change Is Crucial for Growth Measurement
For a long time, the presence of shuttered factories has distorted India’s industrial statistics, making the industrial sector look weaker than it actually is. By replacing closed factories with active ones, the government seeks to provide a better representation of manufacturing trends and growth. Productive industrial statistics are important for policy-making, GDP estimation, investor confidence and sentiment. The change is also consistent with global best practices and recommendations from economic advising committees.
What Businesses and Policymakers Should Expect
The proposal invites the public to submit feedback until November 25, 2025. When adopted, the updated IIP might change historical growth patterns in operating profits, possibly changing the way economic statistics are computed. While businesses might view performance differently, policy makers might have a better understanding of sectoral performance. All in all, the reform demonstrates India’s commitment to robust, real-time measurements of the economy. click here for source
