India Plans Major Overhaul of Industrial Output Index to Reflect Active Factories and Modern Economy

In a move to enhance data accuracy and align with global statistical standards, India’s Ministry of Statistics has proposed revamping the methodology for compiling the country’s Index of Industrial Production (IIP). The ministry plans to replace closed or inactive factories in the index’s sample with operational units, addressing long-standing concerns about outdated data. The revision is part of a wider effort to modernize key economic indicators, including GDP and the Consumer Price Index (CPI), and will update the IIP’s base year from 2011–12 to 2022–23.

Under the proposed changes, factories that report zero output or fail to submit data for three consecutive months will be reviewed and replaced with active units producing similar goods. To ensure consistency, a 12-month “substitution factor” will be applied, allowing both old and new factories to provide overlapping data for a year. The ministry noted that around 8.9% of factories currently included in the IIP have closed over time, leading to distortions in industrial growth estimates.

Officials said the new methodology, recommended by the Technical Advisory Committee and supported by the International Monetary Fund, will help capture structural shifts in India’s evolving industrial landscape and reduce underreporting during factory churn. Stakeholders have been invited to submit feedback on the proposal by November 25. India’s industrial output rose 4% year-on-year in September, driven largely by manufacturing growth.

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