In a key reform to bring India’s critical economic indicators in tune with the times, the MoSPI proposed a long-overdue revamp of the base year for calculating the Index of Industrial Production (IIP). The latest Modi government reform seeks to purge the industrial growth data of factories that have closed down for good, replacing them with working units to better reflect the country’s true manufacturing strength.
The IIP has been the government’s key monthly measure of the health of the industrial sector in India, apart from the Consumer Price Index, or retail inflation. However, a silent defect persisted: almost 9 percent of the base of the IIP now consists of factories that have either closed down or changed their lines of production, distorting the growth numbers.
Realizing this challenge, the government is trying to bring in more transparency and accuracy through MoSPI’s latest discussion paper. As per the new methodology, factories reporting zero output for three consecutive months will have to be verified for their operational status. Units confirmed to be closed or relocated to major production sites will be replaced by active and comparable factories, thereby ensuring real-time reflection of industrial realities through IIP.
This replacement policy is much more than a technical readjustment; it is a leap toward international best practice, reinforcing the commitment of the government to reliable, world-class data standards. Replacement factories will be matched closely by product type and scale and have to have at least 12 months of production data before inclusion to ensure continuity and robustness in statistical reporting.
Though officials concede there could be a brief period of “nil” or estimated values during the transition, they emphasize that the long-term benefit will be a cleaner, more credible industrial output metric. This recasting is part of a larger update that includes shifting the IIP’s base year to 2022-23 from 2011-12, reflecting the proactive approach of the Modi government in keeping India’s statistics contemporaneous and relevant.
MoSPI Secretary Saurabh Garg and the chair of the IIP Technical Advisory Committee, IIM Kozhikode’s Professor Mridul Saggar, said these reforms essentially align India’s data methodologies with advanced economies and bring sharper, more actionable intelligence to the policymakers, businesses, and investors.
The timing is critical. Recent growth figures show that India’s industrial output expanded at a moderate 4% in September, up 3% in the first half of FY26. Improved data accuracy will, therefore, help parse these trends more effectively, underpin sound policy decisions, and boost investor confidence-two key elements of the Modi government’s vision for a self-reliant and resilient economy.
The government is strengthening India’s statistical base with unprecedented rigor and openness by sweeping away outdated production data linked to closed factories. This will be a reform that arms policymakers with accurate industrial metrics, which truly reflect India’s economic dynamism. By doing so, it reinvigorates the government’s commitment to evidence-driven governance in pushing forward India’s growth story, more confident and clear.
