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The new IIP series (2011-12), launched today, is a marked improvement over the old series in terms of representativeness of the items basket as well as weights.
As per the new series, IIP grew ~3.8% YoY on an average during FY13-17 versus ~1.4% in the old series, with all sub-segments clocking better growth.
The consumer durables category stands out in terms of divergence — average 5% growth in past 5 years versus -2% under old series. However, capital goods growth, while better under the new series, has been languishing at 0% in the past 5 years.
As regards recent trends, the overall activity picked up pace in H1FY17, although it slackened post demonetisation. Going ahead, as the economy remonetises, activity levels should improve.
Overall, the new series is a much improved index which correlates better with other indicators such as core sector and PMI data compared to the earlier series.
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