NEW DELHI, Jan 13 (Reuters) - India is considering revisions to the weights used to calculate its Index of Industrial Production annually to better reflect changes in the economy, a government discussion paper said.
The proposal forms part of a broader federal push to overhaul key economic data series by revising base years and updating methods to better match the current economic structure.
The IIP, which tracks output in mining, manufacturing and electricity, currently uses 2011-12 weights and will
revise its base year to 2022-23 in May.
Under India's 2011–12 IIP base, manufacturing carries about 78% weight, mining 14% and electricity 8%, reflecting their shares in industrial activity.
The Statistics ministry is proposing to replace the current fixed-base method with a chain-based approach that would update sector and industry weights each year.
The paper said the current system has become less representative as industries expand, shrink or emerge, and it said the mismatch can create substitution bias and distort growth estimates.
A chain-linked index, used by countries including the U.S., Britain and members of the European Union, would align India's IIP with international statistical best practice.
Under the proposal, the ministry would revise sector weights for mining, manufacturing and electricity annually using the latest available national accounts data.
It would update industry-level weights using the Annual Survey of Industries, the paper said.
However, the paper flags key risks to this approach.
Chain-linked indices are not additive, so sub-indices may not sum exactly to the headline index, and they can drift during periods of sharp volatility.
The paper said each monthly index would undergo three revisions after the release of quick estimates before finalisation.
The government has invited comments and suggestions from stakeholders by January 25.
Late last year, the government also proposed overhauling IIP compilation by removing closed factories from the sample and replacing them with operating units to improve accuracy and align with global standards.
(Reporting by Shubham Batra in New Delhi; Editing by Tasim Zahid)
