🗞️ Why in News The National Statistics Office (NSO) of the Ministry of Statistics and Programme Implementation (MoSPI) released on 28 September 2026 the Quick Estimates of the Index of Industrial Production (IIP) for August 2026: output grew 8.0 per cent over August 2025 (index 123.3 against 114.2), led by manufacturing (9.0 per cent) and electricity and gas supply (12.3 per cent), while mining and quarrying contracted 5.6 per cent. This is the fifth monthly release of the new IIP series with base year 2022-23.
The August Numbers
By sector. The new series has four sectors; the weights show how much each counts.
| Sector | Weight (per cent) | Growth, August 2026 | Index |
|---|---|---|---|
| Manufacturing | 76.062 | 9.0 | 126.6 |
| Mining and quarrying | 11.053 | (-) 5.6 | 85.7 |
| Electricity and gas supply | 10.865 | 12.3 | 133.9 |
| Water supply, sewerage and waste management | 2.020 | 6.3 | 147.6 |
| IIP (overall) | 100 | 8.0 | 123.3 |
By use. The use-based classification groups the same output by what the goods are used for.
| Use-based category | Growth, August 2026 (per cent) |
|---|---|
| Capital goods | 16.9 |
| Intermediate goods | 13.7 |
| Consumer durables | 11.1 |
| Infrastructure and construction goods | 6.4 |
| Primary goods | 3.5 |
| Consumer non-durables | 2.1 |
Other points from the release and reports. 18 of the 23 manufacturing industry groups (NIC two-digit) grew year on year. Electrical equipment (30.9 per cent), other transport equipment (25.3 per cent) and motor vehicles (25.2 per cent) grew fastest. Electricity from renewable sources rose 15.4 per cent, according to The Indian Express. Growth for April-August 2026 averaged 6.7 per cent, against 4.2 per cent a year earlier. The September figure is due on 28 October 2026.
Why the Headline Flatters: the Base Effect
A year-on-year rate compares this August with last August. If last August was weak, even flat output shows as strong growth. That is what happened:
- In August 2025, firms ran down stocks ahead of the GST rate cuts, announced by the GST Council in early September 2025 and in force from 22 September 2025. Output that month was depressed.
- So the year-on-year figure for August 2026 is high, but month on month, industrial output was about 1.8 per cent lower than in July 2026, and manufacturing about 1.4 per cent lower, The Indian Express reported. ICRA’s economist attributed the weak base to this “inventory recalibration”.
- Mining falls every monsoon, as rain stops open-cast work; it fell about 9.2 per cent from July.
Where the worry is. Consumer non-durables (food products, medicines, toiletries) grew only 2.1 per cent in August and 1.2 per cent in April-August. These are everyday goods whose demand should be steady; weakness here suggests strain in mass consumption even as durables (cars, appliances) grow fast. Analysts are watching whether the festival season lifts both.
The New Series in Brief
As background, MoSPI revised the IIP’s base year from 2011-12 to 2022-23, on the advice of a Technical Advisory Committee (TAC-IIP) whose report came out on 25 May 2026. The series was launched in 2026: its first release, for April 2026, came out on 1 June 2026. It is the 10th revision of the base since the first index, which had 1937 as its base.
| Feature | Old series (2011-12) | New series (2022-23) |
|---|---|---|
| Sectors | Mining, manufacturing, electricity (3) | Adds gas supply and a new sector, water supply, sewerage and waste management (4) |
| Weights | Mining 14.372, manufacturing 77.633, electricity 7.995 | Mining 11.053, manufacturing 76.062, electricity and gas 10.865, water and waste 2.020 |
| Item basket | 839 items in 407 item groups | 1,042 products in 463 item groups (120 new, 64 dropped) |
| Mining coverage | Major minerals | Adds minor minerals and rare earth minerals |
| Electricity | One index | Separate renewable and non-renewable indices |
| Value-reported item groups | 109 | 234 (deflated by the WPI until the Output PPI is adopted) |
| Industrial classification | NIC 2008 | NIC 2025 |
The new series is released 28 days after the reference month.
New in the basket: debit and credit cards, CCTV cameras, parts of aircraft and spacecraft, stents and vaccines. Dropped: kerosene, fluorescent tubes and CFLs, sewing machines.
How it is built. The IIP is a Laspeyres, fixed-base volume index: each item’s output is compared with its base-year output and weighted by its base-year importance. Sector weights come from each sector’s share of gross value added (GVA) in 2022-23 in the new National Accounts series; manufacturing weights come from the Annual Survey of Industries (ASI) 2022-23. A linking factor, computed by the geometric-mean method, joins the new series to the old. Seasonally adjusted and chain-linked indices will come later, once enough data exist.
IIP and the Core Index: Keep Them Apart
| IIP | Index of Eight Core Industries (ICI) | |
|---|---|---|
| Compiled by | NSO, MoSPI | Office of the Economic Adviser, DPIIT (Commerce Ministry) |
| Coverage | All of industry: mining, manufacturing, electricity and gas, water and waste | Eight core industries: coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, electricity |
| Timing | 28 days after the month | Earlier, so it is read as a leading indicator |
| Base year | 2022-23 | 2022-23 |
The core industries are a subset of the IIP, so a strong core index usually signals a strong IIP about a week later.
Analysis
1. Read the level, not just the rate. An 8 per cent rate on a weak base can hide a sequential decline. Good analysis looks at the index level, the month-on-month change and a three-month average.
2. Capex is carrying industry. Capital goods (16.9 per cent), intermediates (13.7 per cent) and electrical equipment point to investment demand, including the grid and renewable build-out.
3. The consumption split matters for policy. Strong durables and weak non-durables suggest that better-off households are spending while mass consumption is soft. That bears on the case for demand support, and on how the GST cuts of 2025 have played out.
4. Better measurement is itself news. The new series captures what India now produces (electronics, medical devices, renewable power, waste services) and comes out faster. Old and new growth rates are not strictly comparable across the switch without the linking factor.
UPSC Relevance
GS Paper 3. Indian economy: growth, development and employment; industrial growth; measurement of economic activity; effects of fiscal policy (GST rationalisation).
A question worth preparing. “A high year-on-year growth rate in industrial output may conceal more than it reveals.” Discuss with reference to base effects and the composition of the Index of Industrial Production. (150 words)
The Mains framing. Define the IIP and its compiler. Explain the base effect using the GST-linked destocking of August 2025. Separate capital and consumer goods trends. Note what the 2022-23 series adds. Conclude that policy should read levels, sequential momentum and composition together.
📌 Facts Corner, Knowledgepedia
Prelims, statement-ready facts:
- IIP is compiled by the NSO, MoSPI; new base 2022-23, launched 1 June 2026 (April 2026 data).
- Weights (2022-23): manufacturing 76.062, mining 11.053, electricity and gas 10.865, water, sewerage and waste 2.020.
- New series: 463 item groups, 1,042 products; released 28 days after the month; NIC 2025.
- August 2026: IIP 8.0 per cent; manufacturing 9.0, electricity and gas 12.3, mining (-) 5.6.
- Use-based: capital goods 16.9 per cent, consumer non-durables 2.1 per cent in August 2026.
- Formula: Laspeyres fixed-base; value-reported items deflated by the WPI.
- 10th base revision; the first IIP had base year 1937.
Prelims, the traps:
- The eight core index is released by DPIIT, the IIP by the NSO; both now use base 2022-23.
- Water supply, sewerage and waste management is a new IIP sector; the old series had three sectors.
- A high year-on-year rate can come from a low base; output in August 2026 was lower than in July.
Mains, arguments and keywords:
- Base effect; sequential momentum; capex-led versus consumption-led growth; K-shaped demand.
- Keywords: Laspeyres index, linking factor, use-based classification, statistical modernisation.
Interview, be ready for:
- “Why does India keep revising base years?” To keep the basket and weights true to what the economy now produces; the cost is a break in comparability, bridged by linking factors.
Sources: The Hindu, The Indian Express, PIB, first release of the new IIP series, MoSPI, FAQs on the new IIP series
Source: Industrial Output Grows 8% in August: Reading the New IIP Series (Base 2022-23) — Ujiyari.com | Free UPSC & State PCS Current Affairs
