MoSPI Proposes Chain-Based IIP to Better Reflect Changing Industrial Structure

The Ministry of Statistics and Programme Implementation (MoSPI) has launched the base revision exercise for the Index of Industrial Production (IIP). As part of the process, the ministry is reassessing existing compilation methodologies, exploring alternative data sources, and incorporating updates based on extensive consultations with experts, academicians, data users, and other stakeholders.

Limitations of the Fixed-Base IIP Methodology

Historically, the IIP has been compiled using a fixed-base Laspeyres index, where sectoral and industry weights remain unchanged until the next base-year revision. However, industrial output patterns are constantly evolving due to shifts in demand, technological progress, and policy interventions. 

Over time, certain industries grow in importance, others shrink or become obsolete, and new industries or production lines emerge, making fixed weights increasingly outdated and less representative of current industrial activity.

Case for a Chain-Based IIP Framework

To better reflect these structural changes, MoSPI is examining the adoption of a chain-based approach to IIP compilation. A chain-linked index allows for annual updating of weights, ensuring that changes in industrial composition, both expansions and contractions, are captured more accurately. This approach enhances the relevance, responsiveness, and overall reliability of the index.

Also Read: US Inflation Shows Signs of Cooling in December 2025: Monthly Headline Inflation Reached 0.3%

Discussion Paper Outlines Proposed Methodology

To facilitate informed discussion and feedback, MoSPI has released Discussion Paper 2.0: Adoption of Chain-Based Index of Industrial Production (IIP). The paper details the proposed methodology for implementing a chain-linked IIP and highlights the potential benefits of transitioning to this framework.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.