India Proposes Major Overhaul of Industrial Output Measurement Framework, Expanding Scope and Modernizing Index System

A technical advisory panel under the ministry has recommended comprehensive revisions to the Index of Industrial Production, including an expanded sectoral coverage and the introduction of a chain-linked indexing framework designed to better reflect structural changes in the economy.

The proposed reforms include tracking renewable power generation as a separate category from conventional electricity production, alongside the inclusion of additional utility services such as gas supply, water supply, sewerage services, and waste management operations. The ministry has also recommended revising the base year for the index from 2011–12 to 2022–23 in order to align the measurement system with the current industrial structure.

Under the proposed methodology, a chain-based approach will be introduced alongside the existing fixed-base index, allowing weights assigned to different sectors to be updated annually. This adjustment is intended to reduce distortions caused by outdated weight structures and improve the accuracy of industrial output measurement in a rapidly evolving economy.

The advisory panel has further proposed the use of the geometric mean method to link the 2011–12 series with the new 2022–23 series. According to the framework, linking factors will be computed at aggregated levels for both general and sector-specific indices to ensure continuity in long-term statistical analysis.

In a major restructuring of the energy classification system, electricity generation is proposed to be split into renewable and non-renewable components, reflecting India’s ongoing energy transition. The mining sector coverage is also set to expand with the inclusion of minor minerals and rare earth minerals, recognizing their increasing importance in infrastructure development, clean energy expansion, and high-technology manufacturing.

The manufacturing index will continue to include items classified as not elsewhere classified, ensuring representation of emerging and unconventional products within the production basket. The ministry has also proposed a formal mechanism for the substitution and augmentation of factories, enabling the replacement of closed or outdated industrial units to better represent evolving production patterns.

Another significant change under consideration is the transition from the Wholesale Price Index to the Producer Price Index as the preferred deflator for calculating industrial output, once the latter becomes available. In addition, the framework proposes the creation of separate industrial indices for the unincorporated sector and the eventual publication of seasonally adjusted data for the Index of Industrial Production.

These reforms collectively represent a major overhaul of India’s industrial statistical architecture, aimed at improving accuracy, relevance, and responsiveness to structural changes in the economy.