IIP Explained: India's New 2022-23 Base Year, Sectors and Use-Based Classification

The Ministry of Statistics and Programme Implementation (MoSPI), through its National Statistical Office (NSO), recently released the Index of Industrial Production (IIP). The data for April 2026 is special for two reasons: it is the first reading published under the new base year of 2022-23, and it shows that India's factory output is holding up well despite global disruptions. Industrial output rose by 4.9% compared with the same month a year earlier.

This article explains what the IIP is, who releases it, how it is classified, and why updating its base year matters for students preparing for government exams.

What is the IIP? The Index of Industrial Production is a single number that tracks how much the industrial sector of the economy produces over a period. It is a "volume" index, meaning it measures the quantity of goods produced rather than their price. Because it is released every month, it acts as an early signal of the health of industry. A rising IIP suggests factories, mines and power plants are busy; a falling IIP points to a slowdown.

Who releases it? The IIP is compiled and published by the National Statistical Office (NSO), which works under the Ministry of Statistics and Programme Implementation (MoSPI). It is released monthly, usually with a gap of about six weeks after the reference month.

How is the IIP classified? The IIP is studied in two main ways:

1. Sectoral classification. Earlier the index had three broad sectors: Manufacturing, Mining and Electricity. Under the revised series, a fourth sector has been added: Water Supply, Sewerage and Waste Management, with a weight of 2.02%. The Electricity sector has been widened into Electricity and Gas Supply, and its weight has risen to 10.87% from 7.99%. Manufacturing remains the largest part of the index, though its weight has eased slightly to 76.06% from 77.63%. The weight of Mining and Quarrying has fallen to 11.05% from 14.37%.

2. Use-based classification. The index is also grouped according to how goods are used in the economy. The standard use-based categories are: Primary Goods, Capital Goods, Intermediate Goods, Infrastructure/Construction Goods, Consumer Durables and Consumer Non-Durables. In the April 2026 reading, Capital Goods (machinery and equipment used to make other goods) grew strongly by 16%, helped by high government spending on infrastructure. In contrast, Consumer Durables grew 4.3% and Consumer Non-Durables only 2.8%, hinting that higher fuel and energy costs may be weighing on household demand.

Why does updating the base year matter? A "base year" is a fixed reference year against which production in every other period is measured. The base is set at a value of 100, and later figures show how much output has moved above or below that level. Over time the structure of the economy changes: new products appear, some old items become outdated, and the share of different sectors shifts. If the base year and the basket of goods are not refreshed, the index slowly loses touch with reality.

The shift to the 2022-23 base series updates the basket of goods, adds new products, drops obsolete ones, and changes the weights given to each sector. The reduced weight of mining and the higher weight of utilities and value-added activity reflect India's growing role as a hub for components and value-added manufacturing linked to global supply chains. Because the basket, weights and methods have changed so much, comparisons with older data must be made carefully.

The government has also signalled a move towards a "chain-linked" framework, where the weights of different sectors are updated more frequently rather than staying fixed for many years. Such a system would keep official statistics closer to the real, changing structure of the economy, making the IIP a more accurate and timely measure of industrial health.