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Informist, Tuesday, Nov. 11, 2025

 

NEW DELHI – The Ministry of Statistics and Programme Implementation has released a discussion paper outlining the methodology for substitution of factories in the compilation of the new Index of Industrial Production series. The ministry has invited feedback on the proposed changes to the methodology by Nov. 25.

 

The ministry will release the revised IIP series with the new base year of 2022-23 on May 28, it has previously said. In the discussion paper, the ministry has proposed that a factory should be substituted in the IIP framework if it reports zero production for three consecutive months. A factory may also be substituted if it does not report production data for three continuous months, the paper said.

 

To substitute a factory that either does not report data for three straight months, or reports zero production data for three consecutive months, a source agency will have to confirm the actual status of the factory. The source agency will have to verify if the factory is still operational, whether the factory has changed its line of production, or whether the zero production is due to temporary reasons such as maintenance and seasonal shutdowns.

 

In cases of temporary suspension of production, the factory will not be substituted in the IIP framework, the paper said. "In most instances, the reported value during the temporary closure period is zero, reflecting the absence of production activity. This approach ensures that short-term fluctuations in industrial output, due to temporary shutdowns, are accurately captured without altering the sample composition," the paper said. "However, if the source agency confirms that the unit has either closed down permanently or changed its line of production, the substitution process is initiated."

 

For the substitution process, a factory will be selected from the latest Annual Survey of Industries data. For a factory to substitute the old unit, it must produce the same item or item group and the gross value added should be close to the original factory, the paper said. There should also be a common operation period of 12 months with the old factory, the paper said. "This overlapping data is essential to calculate the Substitution Factor and ensure smooth adjustment of production data."

 

Substitution of a factory will be implemented once the closure or change in production line is confirmed by the source agency. After the confirmation, 12 months of overlapping production data from the replacement unit will be required for incorporation into the index. "Until such overlapping data are obtained, ‘nil' or imputed values may temporarily be used in the series. Consequently, depending on the timing, a few months of ‘nil' production may appear before substitution is reflected," the paper said.  End

 

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

 

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