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Informist, Tuesday, Jan. 13, 2026

 

NEW DELHI - The Ministry of Statistics and Programme Implementation has released a discussion paper outlining the proposed methodology for chain-linked indices as part of the new Index of Industrial Production series. The ministry has invited feedback on the proposed methodology by Jan. 25.

 

The ministry is scheduled to release the new IIP series with the new base year of 2022-23 (Apr-Mar) on May 28. The revision of the IIP series will follow similar exercise for the CPI and GDP, whose new series will be released on Feb. 12 and Feb. 27, respectively.

 

"Traditionally, the IIP has been compiled using a fixed-base Laspeyres framework, in which sectoral and industry weights remain unchanged until a base-year revision," the ministry said. "However, with production shifts in response to demand, technology, and policy changes, some industries expand, while others decline or disappear, and entirely new industries or production lines within an industry emerge. Therefore, fixed weights become progressively less relevant and thus affects the efficacy of the indices."

 

A chain-based method of compilation of IIP will offer better capture these changes by allowing the increase and decrease in weights annually to correctly reflect a more recent production structure, the ministry said. This, it added, will lead to more accurate reporting to industrial production data.

 

It is imperative that the base year of the IIP be revised frequently to update the weights and to introduce new products in keeping with the changing industrial composition, the ministry said. Globally, countries such as the US, the UK, Australia, and some members of the European Union have adopted chain-based indices, the ministry said.

 

The ministry has also proposed an alternative methodology, where chain-linking may be used to update weights every year and the products are updated at least once every five years.

 

A key limitation of chain-based IIP would be lower comparability. "While capturing the current economic reality better, chain-linking introduces complexities that can complicate direct comparisons between different sub-sectors or historical period," the ministry said.

 

To compile a chain-based IIP, the weights of the index would have to be taken from the national accounts data for sectoral weights and the industry weights from the Annual Survey of Industries. The final gross value added data from national accounts for sectoral weight of IIP would only be available after a two-year lag. The gross value added from the Annual Survey of Industries typically becomes available with a lag of a year and a half.

 

In the proposed chain-based IIP, each monthly data will undergo three revisions after release of quick estimates. The first update would take place one month after the release of quick estimates. The second update would happen in April of the subsequent year for intermediate weight revision. The final data will be released one year after the intermediate weight revision.

 

"Finalisation occurs over a two-year horizon. This may lead to confusion among the users as the revisions would be taking place in indices and growth rates for two years at a time," the ministry said. The proposed methodology aligns with the international practices but entails frequent revisions.  End

 

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

 

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