IPI Full Form
What is the full form of IPI?
The full form of IPI is the industrial production index. It is an economic indicator used to measure the real output within a month generated by several industries like manufacturing industries, electric-based industries, Gas industries, mining industries and many others. The industrial production index measures the changes in the level of industrial production in comparison to many industries.
The industrial production index is published in the middle of every month by the federal reserve board and reported on by the conference board members. By best of these data, the FRB also releases revisions to previous estimates every year at the end of March.
Important Points In IPI
This index is a quantity index and notes a value index; in other words, it is measured by the changes in the quantity of production and not in the value of production.
During a given period, there may be an increase in the output of some industries and a reduction in the output of other industries.
IPI is a very important microeconomic indicator for investors and economists.
For specific lines of a business, days data is very useful for managers and investors.
Industries Comes Under IPI
Generally, data of industrial production index are collected under the following Industries:
Mining Industries - Coal, iron ore, copper, aluminum, petroleum etc.
Metallurgical Industries - Iron and steel, rolling mills, etc.
Mechanical Industries Locomotives, ships, aeroplanes, etc.
Textile Industries - Cotton, wool, Jute, Silk, etc.
Industries subject to excise duties - tobacco, breweries, etc.
Miscellaneous - Cement, glass, soap, chemical etc.
The data relating to the production of the industries are collected either monthly, quarterly or yearly.
Calculation Of IPI
To calculate IPI these steps involves in this method are:
(i) Take base year's production (q_0) as 100 and express current year's production (q_1) as a percentage of base year's production, i.e. calculate \begin{aligned}
\left ( q_1\div q_0 \times 100 \right )
\end{aligned}
(ii) Multiply these percentages by the relative weights (W) and obtain its total to get
= \begin{aligned}
\sum \left ( q_1\div q_0 \times 100 \right )\times W
\end{aligned}
(iii) Apply the formula:
Index Number of Industrial Production: \begin{aligned}
\left [\sum \left ( q_1\div q_0 \times 100 \right )\times W\ \right ]
\div \left [ \sum W \right ]
\end{aligned}
Where,
q0= Current year's production
q<1= Current year's production