Index of Industrial Production

Submitted to : RVM Finishing School & Consultancy www.rvmfinishingschool.com 9550812082

INDEX OF INDUSTRIAL PRODUCTION

BY A.S.L.MANASA

SOURAV BISWAS


AGENDA INTRODUCTION CALCULATION CLASSIFICATION OF INDUSTRIES FACTS AND FIGURES IMPACT OF IIP ON INDIAN ECONOMY FUTURE OUTLOOK USES OF IIP PROBLEMS WITH IIP


INTRODUCTION

Definition of IIP : IIP is a number which tells about how

industries are performing over a period of time Calculated by Center for Statistical Operations

(CSO) Commenced in 1937 Recently revised in 2004-2005 It is the leading indicator of economic growth

CALCULATION OF IIP It is calculated using LASPEYERS formula IIP = ∑ ( W1 * R1 ) ∑ W1 Where, R1 = P1 X 100 P0W1 = Base year weightsP1 = Production in current yearP0 = Production in base year Submitted to : RVM Finishing School &

Consultancy www.rvmfinishingschool.com 9550812082

COMPONENTS OF IIP

CLASSIFICATION

MINING (15%)

ELECTRICITY (10%)

MANUFACTURING (75%)

MINING (15%)

ELECTRICITY (10%)

MANUFACTURING (75%)

CONSUMER DURABLES

CONSUMER NON DURABLES

Submitted to : RVM Finishing School & Consultancy www.rvmfinishingschool.com

9550812082


Contd……

CSO gets data from Manufacturing : Dept. of Industrial Policy &

Promotion Electricity : Central Electric Authority Mining : Indian Bureau of Mining ( Nagpur )


USES OF IIP

By central govt. for planning and decision making

Predicts future turning points of business cycles

Investors can assess the impact of economy on their overall portfolio


PROBLEMS WITH IIP

LASPEYERS formula have following draw backs Subsequent change in weights is not accounted Change in quality of goods is not considered Addition of new goods is not accounted till the next

revision Substitution effect is not considered

Data collection Problem : Data from unorganized sectors is difficult to obtain No standardized data collection & production

techniques


FACTS AND FIGURES

2005 2006 2007 2008 2009 2010 2011 2012 20130

2

4

6

8

10

12

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

IIP %RETURN %

IMPACT OF IIP ON INDIAN ECONOMY


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FUTURE OUTLOOK

Its dependent on following factors : Fed Reserve decision on QE3 Stabilization of Chinese economy Early resolution of EU crisis ( Highly unlikely ) Rupee stabilization Domestic demand Government policies



CONCLUSION Low IIP values have direct effect on stock

prices Lower employment Fundamentally strong stocks becomes

undervalued FIIs starts pulling out money from Indian

stock-market Rupee depreciates with respect to USD



Contd….

Growth in IIP numbers are good signs for cement and steel industries

Have a positive impact on the banking sector Lower supply coupled with lower demand can

have catastrophic impact on stock market and was one of the main reasons for drop in Sensex from 20000 to 8000 in 2008.



THANK YOU

Index of Industrial Production

Economy & Finance

Transcript of Index of Industrial Production