REVISION OF THE INDEX OF CORE INDUSTRIES (ICI)

Why In News?

The Office of the Economic Adviser (OEA) under the Department for Promotion of Industry and Internal Trade (DPIIT) released the newly revised Index of Core Industries (ICI).  

What is the Index of Core Industries (ICI)?

It measures the production volume and output across essential infrastructure industries.

It is compiled and published monthly by the Office of the Economic Adviser (OEA) under the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry.

The ICI serves as an early indicator of industrial health because it releases before the broader Index of Industrial Production (IIP), providing an advance signal of economic growth.

The nine core industries supply vital raw materials to the construction, transport, and manufacturing sectors.

The ICI accounts for 32.88% of the revised IIP weight. (Declined from 40.27% in the 2011- 12 series).

Policymakers use the ICI to track supply-side inflation and forecast future GDP trends.

What Has Changed in the Revised ICI Series?

New Base Year: The government updates the base year from 2011-12 to 2022-23 to align the ICI with other major economic metrics like GDP and IIP.

Expansion of the Basket: The government adds Iron Ore as a core industry, expanding the index to track nine sectors instead of eight.

Recalibrated Weights: The government recalibrates sectoral weights based on the new IIP structure.

• Electricity holds the highest weight at 30.93%.

• Refinery Products holds the second-highest weight at 22.57%.

• Steel holds the third-highest weight at 17.58%.

• Coal sector weight dropped from 10.33% to 5.59%.

• Steel Data Methodology: The index adopts gross production data for Steel instead of net production to align with IIP methods.

• Coal Sector Refinement: The index tracks only Raw Coal and excludes Coal Middling and Washed Coal to eliminate double counting.

Linking Factor: The government introduces a linking factor of 1.47 to facilitate seamless comparison between the old and new ICI datasets.

Fertilizer Classification: The government retains Ammonium Sulphate within the fertilizer category following technical reviews.

Why is the Revision Important?

Modern Economic Representation: The new base year reflects India's modern industrial structure and consumption patterns, correcting the limitations of an outdated base year.

Statistical Accuracy: Excluding derived products like washed coal and focusing on gross steel production eliminates statistical flaws and double counting.

Better Policy Formulation: Accurate, high-frequency data provides clear signals to policymakers, helping them plan better infrastructure and industrial policies.

Enhanced Data Quality: The new series directly syncs its methods with the IIP, eliminating confusing signals caused by conflicting datasets.

Energy Mix Insights: The index highlights the changing energy mix, revealing that renewable sources now contribute nearly 30% of electricity generation (Source: Central Electricity Authority).

Strategic Mineral Recognition: The revision recognizes the growing role of Iron Ore in global steel production and infrastructure development.

What are the Key Findings Under the New Series?

Accelerated Core Growth: Provisional estimates show the overall Index of Core Industries expanded by 5.0% in June 2026 compared to June 2025.

Uneven Sectoral Performance: Iron Ore production jumps by 43.9%, while Electricity and Cement both grow by 9.8%. Conversely, Natural Gas, Crude Oil, and Fertilizers post negative growth.

First Quarter Cumulative Growth: Cumulative growth reaches 3.6% during the first quarter of April-June 2026.

Primary Growth Drivers: Iron Ore and Electricity act as the primary drivers of core sector growth under the new series.

Source: THEHINDU