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Index Numbers — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsIndex Numbers6 Marks
Question
Write a short note on Index for Industrial Production.
✓

Answer

The index number of industrial production aims to measure the change in the level of industrial production in a given period as compared to some other time period which is called base year. It measures changes in the quantity of output instead of change in its money value. In India these statistics are compiled by official and non official agencies. The general index of industrial production is most popular among these. In India, index of industrial production is published by Central Statistical Organization (CSO), Industrial Statistics Wing. In computing an index of industrial production as a whole the area which is to be covered needs to be defined properly. These indices are limited to secondary sector activities. Building and construction are also taken as doubtful items at times. A more difficult problem arises in case of repair work. Some repair work is clearly a part of secondary sector like repairs in ship building or railways but sometimes repair is a part of servie sector like automobile repairs, shoe repairs, cloth repairs etc. Another problem arises in selection of weights: some use quantity as weights while others use value as weights.Usually, important data about production are collected under the following major heads:
  1. Mining Industries-Coal: Iron Ore, Copper, Aluminium, Petroleum etc.
  2. Metallurgical Industries: Iron and Steel, Steel Industry etc.
  3. Mechanical Industries: Locomotives, ships, aero planes etc.
  4. Textile Industries-Cotton: Woolen, Jute, Silk etc.
  5. Industries subject to Excise Duty: Sugar, tobacco,, Breweries, Tobacco etc.
  6. Miscellaneous: Cement, Glass, Soap, Chemical etc.
The table given below shows broad industrial groupings and their weights:
S. No.
Broad Groupings
Weight in %
1.
Mining and Quarrying
10.47
2.
Manufacturing
79.36
3.
Electricity
10.17
Usually eights in a index number of industrial production are based on the net output of various industries. The weighted arithmetic mean or geometric mean of the relatives gives the index number of industrial production. Such index numbers can be constructed for gross output as well as net output. Index Number of Industrial Production.
$\text{IIP}=\frac{\sum\bigg(\frac{\text{q}_1}{\text{q}_0}\bigg)\text{W}}{\sum\text{W}}$
Where $q_1 $= Current Year QuantityProduced $q_0 $= Base Year Quantity
Produced W = Relative importance of different outputs.

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