- The monthly Index of Eight Core Industries (ICI) is a production volume index.
- The objective of the ICI is to provide an advance indication on production performance of industries of ‘core’ nature. These industries are likely to impact on general economic activities as well as industrial activities.
- The Eight Core Industries- Electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilizers- comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).
- Industry Weight (In percentage)
- Petroleum & Refinery production – 28.04
- Electricity generation – 19.85
- Steel production – 17.92
- Coal production – 10.33
- Crude Oil production – 8.98
- Natural Gas production – 6.88
- Cement production – 5.37
- Fertilizers production – 2.63
- ICI is released by the Office of Economic Advisor, under the Ministry of Commerce and Industries. The base year of the ICI is 2011-12.
Why in News?
- According to the latest ICI data, the eight core sectors grew by 6.8% in March 2021, after a 3.8% dip in February.
- However the spike was largely due to the base effects from March 2020, when a national lockdown impacted industrial activity.
- As per experts, the March, April and May growth numbers for the core sector were expected to be high and misleading as they come on the back of sharp declines registered last year. Hence, core sector growth of 6.8% in March must be interpreted with caution.
What is Base effect?
- The base effect is the distortion in a monthly inflation figure that results from abnormally high or low levels of inflation in the year-ago month.
- For example, the base effect can lead to an apparent under- or overstatement of figures such as inflation rates or economic growth rates if the point chosen for comparison has an unusually high or low value relative to the current period or the overall data.
- The base effect can lead to distortion in comparisons and deceptive results, or, if well understood and accounted for, can be used to improve our understanding of data and the underlying processes that generate them.