Revised Index Of Core Industries (ICI) – Explained
Source: The Hindu
GS III: Indian Economy- Changes in industrial policy
Overview
- News in Brief
- Index of Core Industries (ICI)
- Key Changes
- Significance of the Revised ICI
- Challenges
Why in the News?
The Government has released the revised Index of Core Industries (ICI) with a new base year and updated methodology.
News in Brief
- The revised index expands the coverage from eight to nine core industries by including iron ore.
- The revision aligns the ICI with
- other indicators such as the national accounts, Consumer Price Index (CPI), Wholesale Price Index (WPI), and the Index of Industrial Production (IIP) were updated earlier this year.
- The overhaul aims to make industrial data more representative of the current structure of the Indian economy.
Index of Core Industries (ICI)
- It is a monthly index measuring the production performance of India’s core infrastructure sectors.
- Compiled by the Office of the Economic Adviser (OEA) under the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce & Industry.
- It serves as a leading indicator of industrial production.
Key Changes
- New Base Year– The baseline has shifted from 2011–12 to 2022–23. This removes decade-old distortions, ensuring that shrunk or newly expanded sectors are represented accurately.
- Nine core sectors– Coal, Crude Oil, Natural Gas, Refinery Products, Fertilisers, Steel, Cement, Electricity, and Iron Ore.
- Iron Ore has been included for the first time, expanding the index from eight to nine core industries and reflecting its growing importance as a key raw material for the steel and infrastructure sectors.
- These nine core sectors comprise 32.88% of the total weight in the Index of Industrial Production (IIP) under the updated series.
- Revised Sectoral Weights – The overall weight of core industries in the Index of Industrial Production (IIP) has been reduced from 40.27% to 32.88% (based on recent economic output).
- Among individual sectors, the weight of Electricity has increased significantly, while Coal has declined.
- No Double Counting – Only raw coal is now counted in the index. Processed coal products such as washed coal and coal middlings have been removed to avoid duplication.
- Updated Steel Measurement – Steel production is now measured using gross output instead of net output, making it consistent with the IIP methodology.
- Linking Factor Introduced – A linking factor of 1.47 has been introduced to ensure a smooth transition and maintain comparability between the old and revised ICI series.
Significance of the Revised ICI
- Captures structural changes in India’s industrial economy.
- Enables timely fiscal and industrial policy decisions.
- Offers more reliable signals of manufacturing and infrastructure activity.
- Helps businesses and investors assess industrial trends.
- Harmonises ICI with other revised macroeconomic indicators, improving data comparability.
Challenges
- Multiple revisions make long-term comparisons difficult.
- Reliable and timely reporting from industries remains essential.
- Services and emerging sectors remain outside the scope of the index.
- Renewable energy, digital infrastructure and advanced manufacturing are not fully represented.
Way Forward & Conclusion
Going forward, the government should Revise economic indicators periodically to reflect structural changes in the economy, ensure regular updates to the base year, strengthen real-time data collection, maintain transparent methodology, and periodically review the inclusion of emerging sectors such as renewable energy.
The revised Index of Core Industries (ICI) is a significant step towards improving the accuracy and relevance of India’s industrial statistics. A robust and representative ICI will support better policymaking, informed investment decisions, and sustainable industrial growth.
UPSC Prelims and Mains Practice Question
With reference to the revised Index of Core Industries (ICI), consider the following statements:
- The revised ICI has changed the base year from 2011–12 to 2022–23.
- Iron Ore has been included as a new core industry in the revised index.
- The Index of Core Industries is compiled by the National Statistical Office (NSO).
- The ICI serves as an important input for the Index of Industrial Production (IIP).
Which of the statements given above is/are correct?
A. 1, 2 and 4 only
B. 1 and 3 only
C. 2, 3 and 4 only
D. 1, 2, 3 and 4
Answer: A
Mains Practice Question
Q. The revision of the Index of Core Industries (ICI) reflects the changing structure of India’s industrial economy. Discuss the significance of the revised ICI, the key changes introduced, and the challenges associated with measuring industrial performance in India. (15 Marks)
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