Output of Core Sectors

News: The eight core sectors grew by 6.8% in March 2021 (the highest in 32 months), after a 3.8% dip in February, but the spike was largely due to the base effects from March 2020. During 2020-21 (April-March), output of the eight sectors contracted by 7% as against a positive growth of 0.4% in 2019-20.

Core Sectors:

  • These comprise 40.27% of the weight of items included in the Index of Industrial Production (IIP).
  • The eight core sector industries in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.

What is Base Effect?

  • The base effect refers to the effect that the choice of a basis of comparison or reference can have on the result of the comparison between data points.
  • For example, the base effect can lead to an apparent under- or overstatement of figures such as inflation rates or economic growth rates if the point chosen for comparison has an unusually high or low value relative to the current period or the overall data.
  • Production of natural gas, steel, cement and electricity jumped 12.3%, 23%, 32.5% and 21.6% in March 2021, as against (-) 15.1%, (-) 21.9%, (-) 25.1% and (-) 8.2% in March 2020, respectively (low base effect).

Index of Industrial Production:

  • IIP is an indicator that measures the changes in the volume of production of industrial products during a given period. It is compiled and published monthly by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation. Base Year for IIP is 2011-2012.
  • It is a composite indicator that measures the growth rate of industry groups classified under Broad sectors, namely, Mining, Manufacturing, and Electricity and Use-based sectors, namely Basic Goods, Capital Goods, and Intermediate Goods.
  • It is used by government agencies including the Ministry of Finance, the Reserve Bank of India, etc, for policy-making purposes. IIP remains extremely relevant for the calculation of the quarterly and advance GDP (Gross Domestic Product) estimates.