- Why in news
- On 13 January 2026, MoSPI released Discussion Paper 2.0 proposing a chain-based Index of Industrial Production (IIP) and invited comments by 25 January 2026.
- What it is
- The Index of Industrial Production (IIP) measures changes in the volume of industrial output over time. It is compiled by MoSPI, and it has so far used a fixed-base Laspeyres method. A chain-based index would update weights every year so the index reflects the current production structure.
- Compiler
- MoSPI is revising the base of the IIP and has released a discussion paper for stakeholder views.
- Current method
- IIP uses a fixed-base Laspeyres framework, with weights unchanged until the base year is revised.
- Why chain-based
- Annual weight changes capture the rise and fall of industries and give better accuracy.
- Sectors in IIP
- IIP has three broad sectors: mining, manufacturing and electricity. Manufacturing has the largest weight.
- Current base year
- The current IIP base year is 2011-12.
Don’t confuse with IIP vs WPI: IIP measures volume of industrial output (MoSPI); WPI measures wholesale price changes (Office of Economic Adviser, DPIIT).
Don’t confuse with Laspeyres vs Paasche: Laspeyres uses base-period weights; Paasche uses current-period weights.
Economy terms and data: 42 Prelims questions since 2013, rising in recent years; they test what a term or instrument means. In Mains, 12 news-triggered questions.
Why it matters
- More accurate picture of industrial growth as the production mix shifts.
- Better input for GDP estimates and policy.
Problems
- Needs timely, detailed annual data for updating weights.
- Chain-linking makes comparisons over long periods more complex.
Way forward
- Finalise methodology after stakeholder comments and expand data sources.
- Release clear explanatory notes and back series for users.
Put in your answer
IIP reform: MoSPI is shifting IIP from fixed-base to chain-linked weights to reflect current production.
- 2021Mains GS3 · Q1Explain differences in India's GDP computation methodology before and after 2015
- 2017Mains GS3 · Q12Why industrial growth lagged overall GDP growth in post-reform period
- 2012Prelims Q39Which items are among the eight core industries within the IIP's combined weight
- 2015Prelims Q8Which industry has the highest weight in the Index of Eight Core Industries
UPSC’s own questions that come close to this issue, from our Prelims and Mains banks.
Prelims practice · Statement I and II
Ours, not from a UPSC paper
Consider the following two statements about the Index of Industrial Production (IIP):
- Statement-I: The IIP has traditionally been compiled using a fixed-base Laspeyres framework, in which sectoral and industry weights stay unchanged until the base year is revised.
- Statement-II: A chain-based IIP changes its weights only when the base year is revised, so it reflects the current production structure.
Which one of the following is correct in respect of the above statements?
True or false?
1 of 6
Statements the way Prelims prints them. Say first, then see the fact.
1.The Index of Industrial Production has so far been compiled using a fixed-base Laspeyres framework.
True. IIP uses a fixed-base Laspeyres framework.
2.In a chain-based IIP, weights are changed only when the base year is revised.
False. Chain-based weights are changed annually; fixed-base weights change only at base revision.
3.The IIP is compiled and released by the Reserve Bank of India.
False. MoSPI compiles the IIP.
4.The IIP has three broad sectors: mining, manufacturing and electricity.
True. Mining, manufacturing and electricity are the broad sectors.
5.The current base year of the IIP is 2004-05.
False. The current base year is 2011-12.
6.A fixed-weight index becomes less relevant over time as new industries emerge and others decline.
True. Fixed weights lose relevance as production structure changes.
Written by us from the release, not by UPSC; checked by a second model.
Worth revising until Prelims 2027: most news questions come within two years of the event.