The Index of Industrial Production is a key macroeconomic indicator used to measure the growth of industrial activity in the country. It plays a crucial role in policy formulation, economic analysis and investment decisions.
Traditionally, the IIP has been compiled using a fixed-base Laspeyres index, where sectoral and industry weights remain unchanged until the base year is revised. While this approach offers stability, it becomes less representative over time as industries evolve.
Limitations of the Fixed-Base Approach
MoSPI has noted that industrial production patterns change continuously due to shifts in demand, technological advancements and policy interventions. Some industries expand rapidly, others decline, and entirely new industries or production lines emerge.
Under a fixed-weight system, such structural changes are not adequately captured, leading to a gradual loss of relevance and accuracy in the index. As a result, the fixed-base IIP may not fully reflect the current industrial landscape.
What Is a Chain-Based Index?
The proposed chain-based method of compiling the IIP allows industry weights to be updated annually rather than remaining fixed for long periods. This approach links successive short-term indices to form a continuous time series.
By adjusting weights regularly, a chain-based index better captures shifts in production patterns, ensuring that fast-growing sectors receive appropriate representation while declining sectors are proportionately adjusted.
Objectives of Discussion Paper 2.0
Discussion Paper 2.0 outlines the proposed methodology for adopting a chain-linked Index of Industrial Production in India. It explains the conceptual framework, potential benefits and operational considerations involved in transitioning to the new system.
The paper builds on earlier consultations and reflects MoSPI’s effort to align India’s statistical practices with international best standards while addressing domestic data realities.
Stakeholder Consultation and Feedback
To ensure a transparent and inclusive process, MoSPI has invited views and comments from a wide range of stakeholders. These include experts, academicians, users of IIP data, Central government ministries and departments, State governments and financial institutions.
Feedback from stakeholders will play a key role in refining the methodology before any final decision on implementation is taken.
How to Access the Paper and Submit Suggestions
The Discussion Paper 2.0: Adoption of Chain-Based Index of Industrial Production is available on the official MoSPI website at www.mospi.gov.in.
Stakeholders may submit their comments and suggestions via email at iipcso[at]nic[dot]in. The last date for submitting feedback is January 25, 2026.
Implications for Economic Policy and Analysis
If adopted, the chain-based IIP is expected to provide policymakers and analysts with a more accurate picture of industrial performance. This could enhance the quality of economic decision-making, forecasting and sectoral analysis.
The initiative reflects MoSPI’s broader commitment to strengthening India’s statistical systems in line with the changing structure of the economy.