The Ministry of Statistics and Programme Implementation (MoSPI) is considering a shift to a chain-based method for compiling the Index of Industrial Production (IIP). This change is part of an ongoing revision of macroeconomic data. The ministry is revisiting methodologies, exploring new data sources, and incorporating changes after consulting experts, academicians, users, and other stakeholders, according to an official statement.
Traditionally, the IIP used a fixed-base Laspeyres framework. This method keeps sectoral and industry weights constant until a base-year revision occurs. However, as production adapts to demand, technology, and policy changes, some industries grow while others shrink or vanish. New industries or production lines also emerge. Consequently, fixed weights become less relevant over time, affecting the indices’ accuracy.
Chain-Based Methodology for Improved Accuracy
The chain-based method offers improved accuracy by capturing these shifts. It allows annual adjustments in weights to better reflect the current production structure. This approach ensures that the indices remain relevant and accurate as industries evolve. The MoSPI has prepared a Discussion Paper 2.0: Adoption of Chain-Based Index of Industrial Production (IIP), which details the proposed methodology for chain-linked indices.
To engage stakeholders in this transition, MoSPI invites feedback on the proposed methodology from experts, academicians, central government ministries and departments, state governments, financial institutions, and other stakeholders. Comments can be submitted by January 25, 2026. This collaborative approach aims to ensure that the new methodology meets the needs of all involved parties.
The shift to a chain-based method is seen as a necessary step to maintain the relevance and accuracy of the IIP. By allowing for regular updates in industry weights, this method can better capture changes in production patterns. This ensures that the indices accurately reflect the current economic landscape.
In summary, MoSPI’s proposal to adopt a chain-based method for IIP compilation marks a significant shift in how industrial production data is measured. By engaging with various stakeholders and incorporating their feedback, MoSPI aims to implement a more accurate and relevant system for tracking industrial production trends in India.
With inputs from PTI
