Explained: What you need to know about IIP and CPI numbers

Moneycontrol BureauThe Index of Industrial Production (IIP) for May witnessed an upside of 1.2 percent against a decline of -0.8 percent in April posting the best figure since February 2016.The Consumer Price Index (CPI) for the month of June jumped to a 22-month high at 5.77 percent compared to 5.76 percent. So what is IIP and CPI. Here is a lookWhat is Index of Indusrial Production (IIP)?

Index of Industrial Production (IIP) tells you whether the manufacturers of industrial goods have either increased or cut their production.

What determines a manufacturer’s production?

Raw materials. If these manufacturers are able to buy raw materials at cheap rates, they will be able to produce more. If raw materials are expensive, they won’t buy them and their output will also come down. It is also called factory output.

What does the index represent?

These changes in the volume of production are expressed in terms of an index number.

What industries come in under the index?

The index is made up of eight industries or manufacturers in the following sectors: Coal, fertilizer, electricity, crude oil, natural gas, refinery products, steel, and cement.

How many items does it cover?

IIP covers 682 items drawn from mining (61 items), manufacturing (620 items) & electricity (1 item)

How many government agencies are involved in supplying data?

The data for compilation of IIP is received from 16 different source agencies.

When is the IIP number published?

IIP numbers are released on monthly basis with the time lag of six weeks from the reference month (on 12th day of the Month, or if 12th is a Gazetted Holiday, on the previous working day).

Is there a base year for IIP and what does it mean?

The base year is given a value of 100. The base year for the IIP series in India is 2004-05. If the current IIP reads as 119 it means that there has been 19 percent growth compared to the base year.

Why is IIP important?

If the IIP grows, it is a sign that companies are doing well, producing more goods.

CONSUMER PRICE INDEX (CPI)

What is CPI?

Consumer Price Index directly affects the common man. It gives an idea of the prices of goods and services that he or she buys from the neighbourhood store.

What determines the CPI?

These prices either go up or down depending on the consumer’s income and tastes.

Why is it important?

This index is an important indicator because if CPI increases, it leads to inflation.

Are any decisions based on CPI numbers?

The dearness allowance of government employees and wage contracts between labour and employer is based on this index. The RBI takes a call to hike or reduce rates based on this number.

Who brings out the CPI numbers?

It is calculated by Central Statistics Office.

What is the lag time?

It is brought out on a monthly basis for urban, rural and all India. The base year is 2012.

What items does it have in the basket?

Food, beverages, tobacco; fuel & light; housing; clothing, bedding and footwear; miscellaneous.

Why is food inflation important?

Any rise in food, beverages, and tobacco will instantly hurt the common man as thsese are consumed the most.

Are there weightages assigned to each of them?

Yes, food and beverages has the most weightage of over 50 percent in the whole basket.