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What does the new 2011-12 IIP series tell about the Indian manufacturing sector?

What does the new 2011-12 IIP series tell about the Indian manufacturing sector? This paper aims to discuss the changes in the new 2011-12 base year series of the Index of Industrial Production (IIP) to determine whether the new series has improved the understanding of the growth in the manufacturing sector.Design/methodology/approachThis paper develops a simple framework to separately estimate the contribution of value- and volume-based commodities in the growth of the manufacturing index. The authors present a case study by analysing the growth performance of IIP drugs and pharmaceuticals sector by comparing it with real net sales of a common sample of firms in this segment.FindingsThe authors find that growth in value-based commodities contributes significantly in moving the index in either direction, and that high growth in value-based commodities coincides with periods of low inflation. On comparability, using real net sales as an alternate indicator of industrial output for the pharmaceuticals sector, the authors find that IIP and real net sales show contrasting trends, thereby raising issues of reliability. The authors also find that the IIP shows a disconnect with growth rates from Annual Survey of Industries for several industries.Practical implicationsThe divergence between two measures of industrial activity raises crucial questions on the representativeness of the IIP.Originality/valueThe study builds a framework to separately estimate the contribution of value- and volume-based commodities in the growth of the manufacturing index. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Indian Growth and Development Review Emerald Publishing

What does the new 2011-12 IIP series tell about the Indian manufacturing sector?

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1753-8254
DOI
10.1108/igdr-12-2017-0110
Publisher site
See Article on Publisher Site

Abstract

This paper aims to discuss the changes in the new 2011-12 base year series of the Index of Industrial Production (IIP) to determine whether the new series has improved the understanding of the growth in the manufacturing sector.Design/methodology/approachThis paper develops a simple framework to separately estimate the contribution of value- and volume-based commodities in the growth of the manufacturing index. The authors present a case study by analysing the growth performance of IIP drugs and pharmaceuticals sector by comparing it with real net sales of a common sample of firms in this segment.FindingsThe authors find that growth in value-based commodities contributes significantly in moving the index in either direction, and that high growth in value-based commodities coincides with periods of low inflation. On comparability, using real net sales as an alternate indicator of industrial output for the pharmaceuticals sector, the authors find that IIP and real net sales show contrasting trends, thereby raising issues of reliability. The authors also find that the IIP shows a disconnect with growth rates from Annual Survey of Industries for several industries.Practical implicationsThe divergence between two measures of industrial activity raises crucial questions on the representativeness of the IIP.Originality/valueThe study builds a framework to separately estimate the contribution of value- and volume-based commodities in the growth of the manufacturing index.

Journal

Indian Growth and Development ReviewEmerald Publishing

Published: Oct 30, 2018

Keywords: Manufacturing; Industrial production

References